ACC/423 Week 3 Question 3 - 63899

Solution Posted by
rmodene

rmodene

Rating : No Rating
Solution Detail
Price: $7.00
  • From: Finance,
  • Posted on: Wed 14 May, 2014
  • Request id: None
  • Purchased: 0 time(s)
  • Average Rating: No rating
Request Description

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, 2012

 

Sharapova Company common stock, $118 par, 236 shares

 

$38,600

April 1

 

U.S. government bonds, 12%, due April 1, 2022, interest payable April 1 and October 1, 112 bonds of $1,000 par each

 

112,000

July 1

 

McGrath Company 12% bonds, par $53,000, dated March 1, 2012, purchased at 104 plus accrued interest, interest payable annually on March 1, due March 1, 2032

 

57,240


(a) Prepare entries necessary to classify the amounts into proper accounts, assuming that all the securities are classified as available-for-sale. 
(Credit account titles are automatically indented when amount is entered. Do not indent manually.)


(b) Prepare the entry to record the accrued interest and the amortization of premium on December 31, 2012, using the straight-line method. 
(Round answers to 0 decimal places, e.g. $2,500. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

 

Sharapova Company common stock

 

$32,660

U.S. government bonds

 

145,020

McGrath Company bonds

 

67,580

(c) The fair values of the investments on December 31, 2012, were:


What entry or entries, if any, would you recommend be made? 
(Round answers to 0 decimal places, e.g. $2,500. Credit account titles are automatically indented when amount is entered. Do not indent manually.)


(d) The U.S. government bonds were sold on July 1, 2013, for $120,220 plus accrued interest. Give the proper entry. 
(Credit account titles are automatically indented when amount is entered. Do not indent manually.)

 

 

Solution Description

(a)

Interest Revenue

 = 

($53,000 x 0.12 x 4/12)

 = 

$2,120

 

       

Debt

Attachments
Week 3 Question 3.docx
Week 3 Question...
Week 3 Question 3 excel solution.xls
Week 3 Question...