Fleet Inc. is an athletic footware company that began operations on January 1, 2

Question

Fleet Inc. is an athletic footware company that began operations on January 1, 2012. The following transactions relate to debt investments acquired by Flett Inc., which has a fiscal year ending on December 31:

2012

Mar. 1 Purchased $36,000 of Madison Co. 5%, 10-year bonds at face value plus accrued interest of $150. The bonds pay interest semiannually on February 1 and August 1.

Apr. 16 Purchased $45,000 of Westville 4%, 15-year bonds at face value plus accrued interest of $75. The bonds pay ibnterest semiannually on April 1 and October 1.

Aug. 1. Received semiannual interest on the Madison Co. bonds.

Sept. 1. Sold $12,000 of Madison Co. bonds at 98 plus accrued interest of $50.

Oct. 1. Received semiannual interest on Westville bonds.

Dec. 1. Accrued $500 interest on Madison Co. bonds.
Dec. 31. Accrued $450 interest on Westville bonds

2013

Feb. 1. Received semiannual interest on the Madison Co. bonds.

Apr. 1. Received semiannual interest on the westville bonds.


Instructions:

1) Journalize the entires to record these transactions

2) If the bond portfolio was classified as available-for-sale, what impact would this have on finaical statement disclosure?

Explanation / Answer

2012

Mar. 1 Purchased $36,000 of Madison Co. 5%, 10-year bonds at face value plus accrued interest of $150. The bonds pay interest semiannually on February 1 and August 1.
Investments DEBIT 36000
Interest receivable DEBIT 150
Cash CREDIT 36150

Apr. 16 Purchased $45,000 of Westville 4%, 15-year bonds at face value plus accrued interest of $75. The bonds pay ibnterest semiannually on April 1 and October 1.
Investment DEBIT 45000
Interest receivable DEBIT 75
Cash CREDIT 45075

Aug. 1. Received semiannual interest on the Madison Co. bonds.
Cash DEBIT 900 (36000*.05/2)
Interest revenue CREDIT 750
Interest receivable CREDIT 150

Sept. 1. Sold $12,000 of Madison Co. bonds at 98 plus accrued interest of $50.
Cash DEBIT 11810 (12000*.98 +50)
Loss on sale of investment DEBIT 240
Investments CREDIT 12000
Interest revenue CREDIT 50

Oct. 1. Received semiannual interest on Westville bonds.
Cash DEBIT 900 (45000*.04/2)
Interest revenue CREDIT 825
Interest receivable CREDIT 75

Dec. 1. Accrued $500 interest on Madison Co. bonds.
Interest receivable DEBIT 500
Intereset revenue CREDIT 500

Dec. 31. Accrued $450 interest on Westville bond.
Interest receivable DEBIT 450
Intereset revenue CREDIT 450

2013

Feb. 1. Received semiannual interest on the Madison Co. bonds.
Cash DEBIT 600 ((36000-12000)*.05/2)
Interest receivable CREDIT 500
Interest revenue CREDIT 100

Apr. 1. Received semiannual interest on the westville bonds.
Cash DEBIT 900
Interest receivable CREDIT 450
Interest revenue CREDIT 450

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