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27 March, 23:10

S&L Financial buys and sells securities which it classifies as available-for-sale. On December 27, 2021, S&L purchased Coca-Cola bonds at par for $875,000 and sold the bonds on January 3, 2022, for $880,000. At December 31, the bonds had a fair value of $873,000, and S&L has the intent and ability to hold the investment until fair value recovers. Prepare journal entries to record (a) any unrealized gains or losses occurring in 2021 and (b) the sale of the bonds in 2022, including recognition of any unrealized gains in 2022 prior to sale and reclassification of amounts out of OCI.

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  1. 28 March, 00:26
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    S&L Financial

    Journal Entries

    Date Description DR CR

    a. 2021

    Jan 3 Bond - available for sale $875,000

    Cash 875,000

    Being the purchase of bond.

    Dec 31 Income statement 2,000

    Bond 2,000

    Being the changes in fair value of the bond

    b. 2022

    Cash 880,000

    Bond 873,000

    Income statement 7,000

    Being the amount realized at sales of bond
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