Cardinal Paz Corp. carries an account in its general ledger called Investments, which contained debits for investment purchases, and no credits, with the following descriptions.
Feb. 1, 2012
Sharapova Company common stock, $117 par, 234 shares
$37,200
April 1
U.S. government bonds, 10%, due April 1, 2022, interest payable April 1 and October
1, 112 bonds of $1,000 par each
112,000
July 1
McGrath Company 12% bonds, par $53,600, dated March 1, 2012, purchased at 104 plus accrued interest, interest payable annually on March 1, due March 1, 2032
57,888
(a) Prepare entries necessary to classify the amounts into proper accounts, assuming that all the securities are classified as availableforsale. Account Titles and Explanation
Debit
Credit
(b) Prepare the entry to record the accrued interest and the amortization of premium on December 31, 2012, using the straightline method. (Round answers to 0 decimal places, e.g. $2,500.)
Account Titles and Explanation
Debit
Credit
(c) The fair values of the investments on December 31, 2012, were:
Sharapova Company common stock
$33,000
U.S. government bonds
146,870
McGrath Company bonds
61,510
What entry or entries, if any, would you recommend be made? (Round answers to 0 decimal places, e.g. $2,500.)
Account Titles and Explanation
Debit
Credit
(d) The U.S. government bonds were sold on July 1, 2013, for $119,830 plus accrued interest. Give the proper entry.
Account Titles and Explanation
Debit
Credit
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