United Intergroup, Inc. held two securities of other companies as investments. U
ID: 2487550 • Letter: U
Question
United Intergroup, Inc. held two securities of other companies as investments. United's fiscal year-end is December 31. The following events during 2011 pertain to the investment portfolio.
Purchase Investments
July 1, 2011 - Purchased Masterwear Industries bonds face value of $500,000, 125 interest, dated July 1. Interest is payable semiannually on June 30 and December 31. The bonds mature in three years. The market yield (effective interest rate) for bonds of similar risk and maturity is 14%. The stock is available for sale (AFS).
Receive Investment Revenue
December 31, 2011 - Received a semi-annual cash interest payment from Masterwear
Adjust Investments to Fair Value
December 31, 2011 - Valued the Arjent stock at $1,040,000.
Sell Investments
January 15, 2012 - Sold the Argent sock for $996,000.
Required:
(1) Prepare the journal entry on July 1, 2011 for the purchase of the bond of Masterwear
(2) Prepare the journal entry on July 1, 2011 for the purchase of the common stock of Arjent.
(3) Prepare the journal entry on December 31, 2011 for receiving of cash interest payment from Masterwear.
(4) Prepare the journal entry on December 31, 2011 for adjusting Arjent's stock to fair value
(5) Prepare the journal entry on January 15, 2012 for selling the Arjent stock.
Explanation / Answer
1.
Journal
Date
Account titles and explanations
P.ref
Debit
Credit
1/7/2011
Investment in bond of M
$500,000
Cash
$500,000
To record purchasing bond through cash
Date
Account titles and explanations
P.ref
Debit
Credit
1/7/2011
Investment in bond of M
$500,000
Cash
$500,000
To record purchasing bond through cash
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.