Answer:
1. Mar.31
Dr Investment in Distribution Transformers bonds $510,000
Cr Cash $510,000
2. September 01,
Dr Investment in American Instruments bonds
$1,230,000
Cr Cash $1,230,000
3 September 30
Dr Cash $20,400
Cr Interest revenue $20,400
4 October 02
Dr Fair value adjustment $80,000
Cr Unrealized holding gain—NI $80,000
5.October 02
Dr Cash $590,000
Cr Investment in Distribution Transformers bonds $510,000
Cr Fair value adjustment $8,000
6. November 01
Dr Investment in M&D Corporation bonds $1,950,000
Cr Cash $1,950,000
7 December 31
Dr Interest receivable $41,000
Cr Interest revenue $41,000
8 December 31
Dr Interest receivable $19,500
Cr Interest revenue $19,500
9. December 31
Dr Fair value adjustment $22,000
Cr Unrealized holding gain—NI $22,000
Explanation:
Preparation of the appropriate journal entry for each transaction or event during 2018, as well as any adjusting entries necessary at year end
1. Mar.31
Dr Investment in Distribution Transformers bonds $510,000
Cr Cash $510,000
2. September 01,
Dr Investment in American Instruments bonds
$1,230,000
Cr Cash $1,230,000
3 September 30
Dr Cash $20,400
Cr Interest revenue $20,400
(8%/2*$510,000)
4 October 02
Dr Fair value adjustment $80,000
Cr Unrealized holding gain—NI $80,000
($590,000-$510,000)
5.October 02
Dr Cash $590,000
Cr Investment in Distribution Transformers bonds $510,000
Cr Fair value adjustment $8,000
6. November 01
Dr Investment in M&D Corporation bonds $1,950,000
Cr Cash $1,950,000
7 December 31
Dr Interest receivable $41,000
Cr Interest revenue $41,000
($1,230,000 x 10% x 4/12)
8 December 31
Dr Interest receivable $19,500
Cr Interest revenue $19,500
($1,950,000* 6% x 2/12)
9. December 31
Dr Fair value adjustment $22,000
Cr Unrealized holding gain—NI $22,000
Available for sale securities Cost Fair market Value Profit/Loss
M & D Corporation shares
$1,950,000 $2,021,000 $ -71,000
American Instruments bonds $1,230,000 $1,181,000 $49,000
Totals $3,180,000 $3,202,000 $22,000
