Question

1.

The balance in the Unrealized Gain or Loss—Equity account will

appear on the balance sheet as a contra asset.

appear as a deduction in the stockholders’ equity section.

appear on the income statement under Other Expenses and Losses.

not be shown on the financial statements until the securities are sold.

2. enek Corporation had the following transactions pertaining to debt investments.	Journalize the transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)
1.		Purchased 41 9%, $1,800 Leeds Co. bonds for $73,800 cash on January 1, 2017. Interest is payable annually on January 1.
2.		Accrued interest on Leeds Co. bonds on December 31, 2017.
3.		Received interest on Leeds Co. bonds on January 1, 2018.
4.		Sold 25 Leeds Co. bonds for $48,708 on January 1, 2018.
Date	Account Titles and Explanation	Debit	Credit
Jan. 1, 2017Dec. 31, 2017Jan. 1, 2018
Jan. 1, 2017Dec. 31, 2017Jan. 1, 2018
Jan. 1, 2018Jan. 1, 2017Dec. 31, 2017
	(To record interest received)
Dec. 31, 2017Jan. 1, 2018Jan. 1, 2017
	(To record sale of bonds)

Answer 1

1.

The balance in the Unrealized Gain or Loss—Equity account will

So answer is b) appear as a deduction in the stockholders’ equity section.

2) Journal entry

Date	General Journal	Debit	Credit
Jan 1	Bond investment	73800
	Cash		73800
Dec 31	Interest receivable (73800*9%)	6642
	Interest revenue		6642
Jan 1	Cash	6642
	Interest receivable		6642
	(To record interest received)
Jan 1	Cash	48708
	Gain on sale of bond investment		3708
	Bond investment (25*1800)		45000
	(To record sale of bonds)