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E9-29 Marketable Debt Securities Use the financial statement effects template to

ID: 2540897 • Letter: E

Question

E9-29 Marketable Debt Securities

Use the financial statement effects template to record the accounts and amounts for the following four transactions involving investments in marketable debt securities classified as available-for-sale securities. Assume that these transactions occur in 2016 (before the new rules for securities went into effect)

a. Loudder Inc. purchases 5,000 bonds with a face value of $1,000 per bond. The bonds are purchased at par for cash and pay interest at an annual rate of 4%

b. Loudder receives semi-annual cash interest of $200,000

c. Year-end fair value of the bonds is $978 per bond

d. Shortly after year-end, Loudder sells all 5,000 bonds for $970 per bond

template:

transaction cash asset noncash assets liabilities contrib. capital earned capital revanues expenses net income 1 2

Explanation / Answer

template:

transaction

cash asset

non cash assets

liabilities

contrib. capital

earned capital

revenue

expenses

net income

1

-5000000

5000000

0

0

0

0

0

0

0

2

200000

0

0

0

200000

200000

0

200000

3

0

-110000

0

0

-110000

-110000

-110000

4

4850000

4890000

-40000

-40000

-40000

template:

transaction

cash asset

non cash assets

liabilities

contrib. capital

earned capital

revenue

expenses

net income

1

-5000000

5000000

0

0

0

0

0

0

0

2

200000

0

0

0

200000

200000

0

200000

3

0

-110000

0

0

-110000

-110000

-110000

4

4850000

4890000

-40000

-40000

-40000