Intermediate Accounting: Journal Entries
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Scenario:
My Client Ricky Gervais has come to my office with the following information:
1. On February 1, the company purchased 12% bonds of Melissa McCarthy Co. having a par value of $500,000 at 100 plus accrued interest. Interest is payable April 1 and October 1.
2. On April 1, semiannual interest is received.
3. On July 1, 9% bonds of Justin Bieber, Inc. were purchased. These bonds with a par value of $200,000 were purchased at 100 plus accrued interest. Interest dates are June 1 and December 1.
4. On September 1, bonds with a par value of $100,000, purchased on February 1, are sold at 99 plus accrued interest.
5. On October 1, semiannual interest is received.
6. On December 1, semiannual interest is received.
7. On December 31, the fair value of the bonds purchased February 1 and July 1 are 95 and 93, respectively.
I need some help completing the following:
a. Prepare any journal entries you consider necessary, including year-end entries (December 31), assuming these are available-for-sale securities.
b. If Ricky Gervais classified these as held-to-maturity securities, explain how the journal entries would differ from those in part (a).
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Solution Summary
In this solution, we prepare a journal entry based on a given set of information about a business and answers a question related to the journal entry.
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Dear student,
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