Question

On January 1, 2018, Hoosier Company purchased $930,000 of 10% bonds at face value. The bond...

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.

Homework Answers

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
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