Use the information below to answer questions 19-24. Jarvic Company began operat

Question

Use the information below to answer questions 19-24. Jarvic Company began operations in 2018 and reported the following marketable debt securities at December 31, 2018: Amortized Marketable Debt Securities Cost Market Yellow Bonds $13,500 $15,200 Orange Bonds 16,000 15,600 Beige Bonds 22,000 22,900 All of the bonds in Jarvic’s bond portfolio pay interest on June 30 and December 31, and all of the bonds have yield rates higher than their face rates. For the year ended December 31, 2018, Jarvic received a total of $2,500 of interest from its marketable debt securities, and it amortized a total of $350 of bond discount using the effective interest method. During 2019, Jarvicsold its investments in Yellow, Orange, and Beige for $55,700. The total amortized cost of Jarvic’s marketable debt securities portfolio on the date of sale was $52,200. In answering questions 19-24, assume the marketable debt securities are classified as available for sale. 19. What amount is reported on Jarvis’ December 31, 2018, balance sheet for marketable debt securities? 20. Make one journal entry to record all of the interest income earned for the year ended December 31, 2018? 21. Make the adjusting journal entry to record the unrealized holding gain (loss) for the year ended December 31, 2018. 22. What is the realized gain from selling marketable debt securities in 2019? 23. What is the net amount reported for other comprehensive loss for 2019? 24. What is the unrealized holding gain component that is reported in other comprehensive loss for 2019?

Explanation / Answer

Part 19: Cost Market Value

Yellow Bonds 13500 15200

Orange Bonds 16000 15600

Beige Bonds 22000 53700

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Total 51500 53700

As securities are classified as available for sale, therefore, it shall be recognised on market value. It shall be reported in the balance sheet for $ 53700

Part 20: Journal entry for income earned during the year

Bank A/c Dr. 2500

Discount on Bonds A/c Dr. 350

To Interest Income on Investments 2850

Part 21: As securities are classified as available for sale, therefore, unrealized gain/loss shall be routed through other comprehensive income

Investment A/c Dr. 2200 (53700-51500)

To Fair Value Gain A/c 2200

Fair Value Gain A/c Dr 2200

To Other Comprehensive Income(OCI) A/c 2200  

Part:22 Bank A/c Dr. 55700

To Investment A/c 52200

To Profit on Sale of Investment 3500

  Profit on Sale of Investment 3500

To Profit & LosS a/c 3500

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