Question

May 17, Purchased 100 Nugent bonds for $800 per bond. July 12, Purchased 40 Alfredo bonds...


May 17, Purchased 100 Nugent bonds for $800 per bond.
July 12, Purchased 40 Alfredo bonds at $600 per bond, plus a $600 brokerage commission.

Largent accounts for these investments as securities available-for-sale. At December 31, 2021, the market values of the securities were as follows:

Security

Market Value per Bond

Nugent

$

720

Alfredo

$

640


Required:
1. Prepare the journal entries to record the acquisition of the two investments.
2. Prepare any necessary adjusting entries assuming the bonds are both classified as available-for-sale securities.

Business   Accounting   
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Answer #1

Journal entries

May 17,

Available for sale investment in Nugent A\c Dr. $80000

To CASH A\c $80000

( investment in bond of Nugent)

July 12,

Available for sale investment in Alferdo A\c Dr. $24000

Brokerage comission (P&L) A\c $600

To Cash A\c $24600

(Being investment made In  Alferdo and brokerage comission paid)

NOTE: INVESTMENT IS CLASSIFIED AS AVAILABLE FOR SALE SO COMISSION CHARGES WILL NOT ADD IN COST OF INVESTMENT...AND TRANSFER TO PROFIT AND LOSS A\C

AJUSTMENT ENTRIES

Less on available for sale investment A\c Dr. $8000

To available for sale investment in Nugent A\c $8000

(BEING decline in value of investment)

Available for sale investment in alfredo A\c Dr. $1600

To gain on available for sale investment A\c $1600

(Being investment value increased)

"PLEASE UPVOTE IF YOU FIND THE SOLUTION IS HELPFUL "

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