Question

On January 1, 2018, Hoosier Company purchased $930,000 of 10% bonds at face value. The bond market value was $980,000 on December 31, 2018.

Required:

Prepare the appropriate journal entry on December 31, 2018, to properly value the bonds assuming

the bonds are classified as:

(1.) Trading securities.

(2.) Securities available for sale.

(3.) Held-to-maturity securities.

Answer 1

Solution 1:

Journal Entries - Hoosier Company
Date	Particulars	Debit	Credit
31-Dec-18	Fair value adjustment Dr	$50,000.00
	To Unrealized holding gain or loss - NI		$50,000.00
	(To adjust bond investment held for trading to fair value.)

Solution 2:

Journal Entries - Hoosier Company
Date	Particulars	Debit	Credit
31-Dec-18	Fair value adjustment Dr	$50,000.00
	To Unrealized holding gain or loss - OCI		$50,000.00
	(To adjust bond investment available for sale to fair value.)

Solution 3:

Journal Entries - Hoosier Company
Date	Particulars	Debit	Credit
31-Dec-18	No Journal Entry Required