Brief Exercise 17-2 Garfield Company purchased, as an available-for-sale securit

Question

Brief Exercise 17-2

Garfield Company purchased, as an available-for-sale security, $90,400 of the 9%, 7-year bonds of Chester Corporation for $81,880, which provides an 11% return.

Prepare Garfield’s journal entries for (a) the purchase of the investment, (b) the receipt of annual interest and discount amortization, and (c) the year-end fair value adjustment. (Assume a zero balance in
the Fair Value Adjustment account.) The bonds have a year-end fair value of $85,880. (Round answers to 0 decimal places, e.g. 1,225. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

No.

Account Titles and Explanation

Debit

Credit

(a)

(b)

(c)

Open Show Work

No.

Account Titles and Explanation

Debit

Credit

(a)

(b)

(c)

Explanation / Answer

Solution:

Journal Entries - Garfield Company No. Account Titles and Explanation Debit Credit (a) Debt Investment Dr $81,880.00        To Cash $81,880.00 (To record investment in bond) (b) Cash Dr $8,136.00 Debt Investment Dr $871.00        To Interest Income $9,007.00 (To record interest income and discount amortization) (c) Fair value adjustment Dr $3,129.00        To Unrealized holding gain or loss - OCI $3,129.00 (To record fair value adjustment on AFS investment)

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.