Soto Industries Inc. is an athletic footware company that began operations on January 1, Year 1. The following transactions relate to debt investments acquired by Soto Industries Inc., which has a fiscal year ending on December 31: Record these transactions on page 10 Year 1 Apr. 1. Purchased $71,400 of Welch Co. 9%, 15-year bonds at their face amount plus accrued interest of $1,071. The bonds pay interest semiannually on March 1 and September 1. June 1. Purchased $60,000 of Bailey 8%, 10-year bonds at their face amount plus accrued interest of $200. The bonds pay interest semiannually on May 1 and November 1. Sept. 1 Received semiannual interest on the Welch Co. bonds. 30 Sold $26,400 of Welch Co. bonds at 97 plus accrued interest of $198. Nov. 1 Received semiannual interest on the Bailey bonds. Dec. 31 Accrued $1,350 interest on the Welch Co. bonds. 31 Accrued $800 interest on the Bailey bonds. Record these transactions on page 11 Year 2 Mar. 1 Received semiannual interest on the Welch Co. bonds. May 1 Received semiannual interest on the Bailey bonds. Required: 1. Journalize the entries to record these transactions. Refer to the information given and the Chart of Accounts provided for the exact wording of the answer choices for text entries. 2. If the bond portfolio is classified as available for sale, what impact would this have on financial statement disclosure? 2. If the bond portfolio is classified as available for sale, what impact would this have on financial statement disclosure? If the bonds are classified as available-for-sale securities, then the portfolio of bonds would need to be . This would be accomplished by using a valuation allowance account and an unrealized gain (loss) account as part of . If the fair value were than the cost of the bond portfolio, the two accounts would be positive and, thus, added to investments and stockholders’ equity, respectively. If the fair value were than the cost of the bond portfolio,

Soto Industries Inc. is an athletic footware company that began operations on January 1, Year 1. The following transactions relate to debt investments acquired by Soto Industries Inc., which has a fiscal year ending on December 31: Record these transactions on page 10 Year 1 Apr. 1. Purchased $71,400 of Welch Co. 9%, 15-year bonds at their face amount plus accrued interest of $1,071. The bonds pay interest semiannually on March 1 and September 1. June 1. Purchased $60,000 of Bailey 8%, 10-year bonds at their face amount plus accrued interest of $200. The bonds pay interest semiannually on May 1 and November 1. Sept. 1 Received semiannual interest on the Welch Co. bonds. 30 Sold $26,400 of Welch Co. bonds at 97 plus accrued interest of $198. Nov. 1 Received semiannual interest on the Bailey bonds. Dec. 31 Accrued $1,350 interest on the Welch Co. bonds. 31 Accrued $800 interest on the Bailey bonds. Record these transactions on page 11 Year 2 Mar. 1 Received semiannual interest on the Welch Co. bonds. May 1 Received semiannual interest on the Bailey bonds. Required: 1. Journalize the entries to record these transactions. Refer to the information given and the Chart of Accounts provided for the exact wording of the answer choices for text entries. 2. If the bond portfolio is classified as available for sale, what impact would this have on financial statement disclosure? 2. If the bond portfolio is classified as available for sale, what impact would this have on financial statement disclosure? If the bonds are classified as available-for-sale securities, then the portfolio of bonds would need to be . This would be accomplished by using a valuation allowance account and an unrealized gain (loss) account as part of . If the fair value were than the cost of the bond portfolio, the two accounts would be positive and, thus, added to investments and stockholders’ equity, respectively. If the fair value were than the cost of the bond portfolio,

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Record these transactions on page 10

Year 1
Apr.	1.	Purchased $71,400 of Welch Co. 9%, 15-year bonds at their face amount plus accrued interest of $1,071. The bonds pay interest semiannually on March 1 and September 1.
June	1.	Purchased $60,000 of Bailey 8%, 10-year bonds at their face amount plus accrued interest of $200. The bonds pay interest semiannually on May 1 and November 1.
Sept.	1	Received semiannual interest on the Welch Co. bonds.
	30	Sold $26,400 of Welch Co. bonds at 97 plus accrued interest of $198.
Nov.	1	Received semiannual interest on the Bailey bonds.
Dec.	31	Accrued $1,350 interest on the Welch Co. bonds.
	31	Accrued $800 interest on the Bailey bonds.

Record these transactions on page 11

Year 2
Mar.	1	Received semiannual interest on the Welch Co. bonds.
May	1	Received semiannual interest on the Bailey bonds.

Required:

1.	Journalize the entries to record these transactions. Refer to the information given and the Chart of Accounts provided for the exact wording of the answer choices for text entries.
2.	If the bond portfolio is classified as available for sale, what impact would this have on financial statement disclosure?

2. If the bond portfolio is classified as available for sale, what impact would this have on financial statement disclosure?

If the bonds are classified as available-for-sale securities, then the portfolio of bonds would need to be . This would be accomplished by using a valuation allowance account and an unrealized gain (loss) account as part of . If the fair value were than the cost of the bond portfolio, the two accounts would be positive and, thus, added to investments and stockholders’ equity, respectively. If the fair value were than the cost of the bond portfolio, the two accounts would be negative and, thus, subtracted from investments and stockholders’ equity, respectively.

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