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3 July, 02:25

On January 1, 2021, Hoosier Company purchased $940,000 of 10% bonds at face value. The bond market value was $985,000 on December 31, 2021. Required: Prepare the appropriate journal entry on December 31, 2021, to properly value the bonds assuming the bonds are classified as: (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Trading securities. Securities available-for-sale. Held-to-maturity securities.

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  1. 3 July, 03:35
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    1.

    Dr Bonds 940,000

    Cr Cash 940,000

    Dr Fair Value adjustment 45,000

    Cr Net Unrealized holding gains & losses 45,000

    2.

    Dr Fair Value adjustment 45,000

    Cr Net Unrealized holding gains & Losses 45,000

    3.

    Dr Investment in bonds 985,000

    Cr Discount on bond investment 45,000

    Cr Cash 940,000

    Explanation:

    Hoosier Company Journal entries

    1.

    Dr Bonds 940,000

    Cr Cash 940,000

    Dr Fair Value adjustment 45,000

    ($985,000-$940,000)

    Cr Net Unrealized holding gains & losses 45,000

    2.

    Dr Fair Value adjustment 45,000

    Cr Net Unrealized holding gains & Losses 45,000

    3.

    Dr Investment in bonds 985,000

    Cr Discount on bond investment 45,000

    Cr Cash 940,000
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