Question

Colah Company purchased $2.3 million of Jackson, Inc. 6% bonds at par on July 1, 2018, with interest paid semi-annually. When the bonds were acquired Colah decided to elect the fair value option for accounting for its investment. At December 31, 2018, the Jackson bonds had a fair value of $2.63 million. Colah sold the Jackson bonds on July 1, 2019 for $2,070,000.

The purchase of the Jackson bonds on July 1.

Interest revenue for the last half of 2018.

Any year-end 2018 adjusting entries.

Interest revenue for the first half of 2019.

Any entry or entries necessary upon sale of the Jackson bonds on July 1, 2019.

Answer 1

Journal entry :

Date	accounts & explanation	debit	credit
2018 July 1	Investment in bonds a/c	23,00,000
	Cash a/c		23,00,000
	(To record investment in bonds)
2018 dec 31	Cash a/c (2300000*6%*6/12)	69000
	Interest revenue a/c		69000
	(To record interest revenue)
2018 dec 31	Investment in bonds a/c	330000
	Unrealized gain		330000
	(To record year end adjusting entry)
2019 July 1	Cash	69000
	Interest revenue		69000
	(To record interest)
2019 July 1	Cash	2070000
	Loss on sale of investment	560000
	Investment in bonds a/c		2630000
	(To record sale of bonds)