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    Cardinal Paz Corp.

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    Cardinal Paz Corp. carries an account in its general ledger called Investments, which contained debits for investment purchases, and no credits, with the following descriptions.

    Feb. 1, 2010 Sharapova Company common stock, $100 par, 200 shares $37,400
    April 1 U.S. government bonds, 11%, due April 1, 2020, interest payable April 1 and October 1, 110 bonds of $1,000 par each 110,000
    July 1 McGrath Company 12% bonds, par $50,000, dated March 1, 2010 purchased at 104 plus accrued interest, interest payable annually on March 1, due March 1, 2030 54,000

    Prepare entries necessary to classify the amounts into proper accounts, assuming that all the securities are classified as available-for-sale. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)

    Description/Account Debit Credit

    Prepare the entry to record the accrued interest and the amortization of premium on December 31, 2010, using the straight-line method. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2. Round computations to 3 decimal places, e.g. 12.252 and the final answers to zero decimal places, e.g. 12,510.)

    Description/Account Debit Credit

    The fair values of the securities on December 31, 2010, were:
    Sharapova Company common stock $31,800
    U.S. government bonds 124,700
    McGrath Company bonds 58,600

    What entry or entries, if any, would you recommend be made? (Round answers to 0 decimal places, e.g. 25,000.)

    Description/Account Debit Credit

    The U.S. government bonds were sold on July 1,2011, for $119,200 plus accrued interest. Give the proper entry. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)

    Description/Account Debit Credit

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    Solution Preview

    Sure, I'd love to help. This is how I would construct the entries.

    Prepare entries necessary to classify the amounts into proper accounts, assuming that all the securities are classified as available-for-sale. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)

    Available for sale securities 199,400 (37400 + 110000 + (50000 x 1.04))
    Interest revenue 2,000 (50000 x .12 x 4/12)
    Investments 201,400

    (This would be the only entry. No other entries are ...

    Solution Summary

    Cardinal Paz Corp. carries an account in its general ledger called Investments, which contained debits for investment purchases, and no credits, with the following descriptions.

    $2.19

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