On june 1, 2018, Josh\'s Restaurant decides to invest excess cash of $54,400 fro

Question

On june 1, 2018, Josh's Restaurant decides to invest excess cash of $54,400 from the tourist season by purchasing a Jackrabbit, Inc. bond at face value. At year-end, December 31, 2018, Jackrabbit's bond had a market value of $51,200. The investment is categorized as an available-for-sale debt investment and will be help for the short-term.

1. journalize the transactions for Josh's investment in Jackrabbit, Inc. for 2018.

2. in what category abd at what value would Josh report the asset on December 31,2018, balance sheet? In what account would the market price change in Jackrabbit's stock be reported, if at all?

3.What was the net effect of the investment on Josh's net income for the year ended December 31,2018.

Explanation / Answer

1. Jun 1 2018 - Investment in Jack rabbit AC ... Dr 54400

To Cash 54400

2. Balance Sheet - Investments (Available for sale) - Jack rabbit

The change in stock price will not affect the Investment as he has bought a BOND.

3. As it is categorized as Available for sale , the Bond will be recorded at fair vale ( i.e 51,200) but the Loss will not be reflected in the Income statement. It will be shown under Other Comprehensive income.

If this answer was helpful , Please leave a thumbs up! If you are unsatisfied with my answer , please leave a note in the comments section and I will try my best to clarify it for you. All the best! Thanks :) Feel free to comment for any clarifications.

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.