Exercises: E17-1 (Investment Classifications) For the following investments, identify whether they are: 3
Each case is independent of the other. a)A bond that will mature in 4 years was bought 1 month ago when the price dropped. As soon as the value increases, which is expected next month, it will be sold. Tradingb)10% of the outstanding stock of Farm-Co was purchased. The company is planning on eventually getting a total of 30% of its outstanding stock. c)10-year bonds were purchased this year. They will be sold when the bonds mature at the first of next year. HTMd)Bonds that will mature in 5 years are purchased. The company would like to hold them until they mature, but money has been tight recently and they may need to be sold. TRADINGe)A bond that matures in 10 years was purchased. The company is investing money set aside for an expansion project planned 10 years from now. f)Preferred stock was purchased for its constant dividend. The company is planning to hold the preferred stock for a long time. AFS (it is not trading and is not HTM)E17-2 (Entries for Held-to-Maturity Securities) On January 1, 2012, Jennings Company purchased at par 10% bonds having a maturity value of $300,000. They are dated January 1, 2012, and mature January 1, 2017, with interest receivable December 31 of each year. The bonds are classified in the held-to-maturity category.Instructionsa)Prepare the journal entry at the date of the bond purchase. b)Prepare the journal entry to record the interest received for 2012. c)Prepare the journal entry to record the interest received for 2013. E17-3 (Entries for Held-to-Maturity Securities) On January 1, 2011, Roosevelt Company purchased 12% bonds, having a maturity value of $500,000, for $537,907.40. The bonds provide the bondholders with a 10%yield. They are dated January 1, 2011, and mature January 1, 2016, with interest receivable December 31 of 4
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- Winter '14