Question

Common Stock	$65,000
Treasury Stock (at cost)	$13,400
Paid-in-Capital in Excess of Par	$82,000
Investments in AFS Equity Securities	$40,000
FVA (AFS)	$2,500 credit
Retained Earnings	$22,000

On that date, the Accumulated OCI account was at its appropriate balance.

There were no sales or purchases of Common Stock or Investments during 2018. Prior to any adjusting journal entries related to the Investments, 2018 Net Income was $10,300. No other transactions affecting Retained Earnings occurred. Fair Value of the Investments at 12/31/18 was $41,500.

Required:

2.       The following information relates to the HTM debt securities investments of Kiran Company during 2018:

a.            February 1: The company purchased 10% bonds of Tempe Co. having a par value of $150,000 at 102 plus accrued interest. Interest is payable March 1 and September 1. Maturity date is 9/1/19.

b.            March 1: Semiannual interest is received and amortization is updated.

c.             June 1: 9% bonds of Flagstaff, Inc. were purchased. These bonds with a par value of $80,000 were purchased at 98 plus accrued interest. Interest dates are Jan 1 and July 1. Maturity date is 1/1/20.

d.            July 1: Semiannual interest is received and amortization is updated on Flagstaff bonds.

e.            September 1: Semiannual interest is received and amortization is updated on Temple bonds.

f.             December 31: Interest is accrued and amortization is updated on both sets of bond.

Required:

a)       Prepare journal entries for all dates. Present journal entries for the Tempe bonds (a, b, e, f), then journal entries for the Flagstaff bonds (c, d, f). No explanations or supporting computations are required. Use straight-line amortization. Do NOT use separate accounts for discounts and premiums; instead, net them into the Investments account. When computing amortization, round the monthly amortization amounts to the nearest cent. However, journal entry amounts can be rounded to the nearest dollar.

Please Show your calculation

Answer 1