FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question

G.261.

 

 

Safety Development Corporation had relatively large idle cash balances and invested them as follows in securities to be held as non-
strategic investments:
2023
Feb. 7 Purchased 3,100 common shares of Royal Bank at $27.40, plus $500 in transaction fees.
19 Purchased 2,108 common shares of Imperial Oil at $54.00, and paid $250 in transaction fees.
Apr. 1 Paid $97,182 plus $500 in transaction fees for a 8.60%, four-year, $99,000 Minco Inc. bond that pays interest
quarterly beginning June 30. The market rate of interest on this date was 9.00%. Sellers Corporation plans to
hold this investment for the duration of the bond's contract life.
May 26 Purchased 2,900 common shares of BCE at $14.28, plus $200 in transaction fees.
June
1 Received a $0.25 per share cash dividend on the Royal Bank common shares.
17 Sold 2,100 Royal Bank common shares at $27.90.
30 Received interest on the Minco Inc. bond.
Aug. 5 Received a $0.50 per share cash dividend on the Imperial Oil common shares.
Sept. 1 Received a $0.275 per share cash dividend on the remaining Royal Bank common shares.
30 Received interest on the Minco Inc. bond.
Dec. 31 Received interest on the Minco Inc. bond.
On December 31, 2023, the fair values of the investments held by Safety Development Corporation were: Royal Bank, $28.40; Imperial
Oil, $52.38; and BCE, $14.40. Assume the fair value and carrying value of the Minco Inc. bond were equal.
Required:
1. Prepare an amortization schedule for the Minco Inc. bond showing only 2023. (Round your intermediate and final answers to the
nearest whole dollar amount. Enter all the amounts as positive values.)
Apr. 1/23
June 30/23
Sept. 30/23
Dec. 31/23
View transaction list
Cash
Interest
Received
Journal entry worksheet
1
2. Prepare journal entries to record the investment activity including the appropriate fair value adjustment on December 31. (Round
your intermediate and final answers to the nearest whole dollar amount.)
Date
Feb 07, 2023
Record the purchase of investment.
Note: Enter debits before credits.
2 3 4 5 6
Assets
Period Interest
Income
Record entry
Show Transcribed Text
Current Investments:
General Journal
Non-current investments:
Clear entry
SAFETY DEVELOPMENT CORPORATION
Partial Balance Sheet
December 31, 2023
Discount
Amort.
7
Unamortized
Discount
8
Debit
12
Carrying Value
Credit
3. Show how the investments will be reported on the December 31, 2023, balance sheet. (Round your intermediate and final answers
to the nearest whole dollar amount.)
View general journal
>
Analysis Component:
If the fair value adjustment is not recorded by Safety Development Corporation, what is the impact on the financial statements?
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Transcribed Image Text:Safety Development Corporation had relatively large idle cash balances and invested them as follows in securities to be held as non- strategic investments: 2023 Feb. 7 Purchased 3,100 common shares of Royal Bank at $27.40, plus $500 in transaction fees. 19 Purchased 2,108 common shares of Imperial Oil at $54.00, and paid $250 in transaction fees. Apr. 1 Paid $97,182 plus $500 in transaction fees for a 8.60%, four-year, $99,000 Minco Inc. bond that pays interest quarterly beginning June 30. The market rate of interest on this date was 9.00%. Sellers Corporation plans to hold this investment for the duration of the bond's contract life. May 26 Purchased 2,900 common shares of BCE at $14.28, plus $200 in transaction fees. June 1 Received a $0.25 per share cash dividend on the Royal Bank common shares. 17 Sold 2,100 Royal Bank common shares at $27.90. 30 Received interest on the Minco Inc. bond. Aug. 5 Received a $0.50 per share cash dividend on the Imperial Oil common shares. Sept. 1 Received a $0.275 per share cash dividend on the remaining Royal Bank common shares. 30 Received interest on the Minco Inc. bond. Dec. 31 Received interest on the Minco Inc. bond. On December 31, 2023, the fair values of the investments held by Safety Development Corporation were: Royal Bank, $28.40; Imperial Oil, $52.38; and BCE, $14.40. Assume the fair value and carrying value of the Minco Inc. bond were equal. Required: 1. Prepare an amortization schedule for the Minco Inc. bond showing only 2023. (Round your intermediate and final answers to the nearest whole dollar amount. Enter all the amounts as positive values.) Apr. 1/23 June 30/23 Sept. 30/23 Dec. 31/23 View transaction list Cash Interest Received Journal entry worksheet 1 2. Prepare journal entries to record the investment activity including the appropriate fair value adjustment on December 31. (Round your intermediate and final answers to the nearest whole dollar amount.) Date Feb 07, 2023 Record the purchase of investment. Note: Enter debits before credits. 2 3 4 5 6 Assets Period Interest Income Record entry Show Transcribed Text Current Investments: General Journal Non-current investments: Clear entry SAFETY DEVELOPMENT CORPORATION Partial Balance Sheet December 31, 2023 Discount Amort. 7 Unamortized Discount 8 Debit 12 Carrying Value Credit 3. Show how the investments will be reported on the December 31, 2023, balance sheet. (Round your intermediate and final answers to the nearest whole dollar amount.) View general journal > Analysis Component: If the fair value adjustment is not recorded by Safety Development Corporation, what is the impact on the financial statements?
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