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On 5/2/20, Anna Company purchased $100,000 of the 9%, 10-year bonds of Dexter Corporation for $106,247,...

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Accounting

On 5/2/20, Anna Company purchased $100,000 of the 9%, 10-yearbonds of Dexter Corporation for $106,247, which provides an 8%return on annual interest payments made every 5/ Anna does notintend to hold the bonds until maturity, but will hold them forlonger than a year. The market value of the bonds at 12/31/20 is$106,100 and at 12/31/21 is $106,000. On 3/1/22, Anna sells thebonds for $105,950. What journal entries will Anna make in 2020 and2021 to appropriately record these transactions and to report thisinvestment on the year-end financial statements and on 3/1/22 torecord the sale of the investment?

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Answer:

Date General Journal Dr. Cr.
5/2/2020 Available for sale securities $     106,247
     Cash $    106,247
12/31/2020 Unrealized gain/loss-other comprehensive income 147
     Available for sale securities 147
12/31/2021 Unrealized gain/loss-other comprehensive income 100
     Available for sale securities 100
3/1/2022 Cash         105,950
Realized loss on available for sale securities                 297
     Unrealized gain/loss-other comprehensive income                247
     Available for sale securities         106,000

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