grand ACC371 week 2 assignment

P17-7 (Available-for-Sale and Held-to-Maturity Debt Securities Entries)The following information relates to the debt securities investments of Wildcat Company.

1.On February 1, the company purchased 10% bonds of Gibbons Co. having a par value of $300,000 at 100 plus accrued interest. Interest is payable April 1 and October 1.

2.On April 1, semiannual interest is received.

3.On July 1, 9% bonds of Sampson, Inc. were purchased. These bonds with a par value of $200,000 were purchased at 100 plus accrued interest. Interest dates are June 1 and December 1.

4.On September 1, bonds with a par value of $60,000, purchased on February 1, are sold at 99 plus accrued interest.

5.On October 1, semiannual interest is received.

6.On December 1, semiannual interest is received.

7.On December 31, the fair value of the bonds purchased February 1 and July 1 are 95 and 93, respectively.

Instructions

(a)Prepare any journal entries you consider necessary, including year-end entries (December 31), assuming these are available-for-sale securities.

(b)If Wildcat classified these as held-to-maturity investments, explain how the journal entries would differ from those in part (a).

P17-10 (Gain on Sale of Investments and Comprehensive Income)On January 1, 2014, Acker Inc. had the following balance sheet.

ACKER INC.

BALANCESHEET

AS OFJANUARY 1, 2014

Assets Equity

Cash $ 50,000 Common stock $260,000

Equity investments (available-for-sale) 240,000 Acc. other comprehensive income 30,000

Total $290,000 Total $290,000

The accumulated other comprehensive income related to unrealized holding gains on available-for-sale securities. The fair value of Acker Inc.’s available-for-sale securities at December 31, 2014, was $190,000; its cost was $140,000. No securities were purchased during the year. Acker Inc.’s income statement for 2014 was as follows. (Ignore income taxes.)

ACKER INC.

INCOMESTATEMENT

FOR THEYEAR ENDEDDECEMBER 31, 2014

Dividend revenue $ 5,000

Gain on sale of investments 30,000

Net income $35,000

Instructions

(Assume all transactions during the year were for cash.)

(a)Prepare the journal entry to record the sale of the available-for-sale securities in 2014.

(b)Prepare a statement of comprehensive income for 2014.

(c)Prepare a balance sheet as of December 31, 2014.