FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Husky Corporation is a general contractor which occasionally invests excess cash in debt securities. The following transactions took place in the fourth quarter of 2021.
- On October 1, 2021, purchased $6 million of 3% Microsoft
bonds at par value. These bonds pay interest on June 30 and December 31 of each year, and were classified as Held to Maturity (“HTM”). - On November 1, 2021, purchased $3 million of 4% Amazon bonds at par value. These bonds pay interest on September 30 and March 31 of each year, and were classified as Available for Sale (“AFS”)
- On December 1, 2021, purchased $2 million of 3% US Treasury Bonds at par value, hoping to earn profits on short-term price increases driven by a decline in interest rates. These bonds were classified as Trading Securities. (“TS”)
- On December 31, 2021, received the interest payment ($45,000) on the Microsoft bonds purchased on October 1.
Requirements:
- Prepare
journal entries for the transactions in a. through d. above. - Prepare journal entries to accrue any interest receivable on the Amazon and US Treasury bonds at December 31, 2021
- Assume that each of these investments increased by 10% between the time it was purchased, and December 31, 2021. Prepare any journal entries necessary to record unrealized gain as of December 31, 2021.
- Prepare a short table that shows that impact of the above transactions for 2021 on
- Net Income
- Other Comprehensive Income, and
- Comprehensive Income
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