ACCOUNTING
Cardinal Paz Corp. carries an account in its general ledger called Investments, which contained debits for investment purchases, and no credits, with the following descriptions.
Feb. 1, 2010 Sharapova Company common stock, $100 par, 200 shares $ 37,400
April 1 U.S. government bonds, 11%, due April 1, 2020, interest payable
April 1 and October 1, 110 bonds of $1,000 par each 110,000
July 1 McGrath Company 12% bonds, par $50,000, dated March 1, 2010 purchased at 104 plus accrued interest, interest payable annually on March 1, due March 1, 2030 54,000
Instructions
(Round all computations to the nearest dollar.)
(a) Prepare entries necessary to classify the amounts into proper accounts, assuming that all the securities are classified as available-for-sale.
(b) Prepare the entry to record the accrued interest and the amortization of premium on December 31, 2010 using the straight-line method.
(c) The fair values of the securities on December 31, 2010, were:
Sharapova Company common stock $ 31,800
U.S. government bonds 124,700
McGrath Company bonds 58,600
What entry or entries, if any, would you recommend be made?
(d) The U.S. government bonds were sold on July 1, 2011, for $119,200 plus accrued interest. Give the proper entry.
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