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Chapter 19

1) The documents record various transactions involving trading securities, interest income, cash, and unrealized gains/losses over multiple periods. 2) Transactions include purchases and sales of trading securities, recording of accrued interest and interest income earned, and recognition of unrealized gains or losses when the market value of securities changes. 3) Several problems show amortization schedules for bonds purchased at a premium or discount over their holding periods.

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GONZALES, MICA ANGEL A.
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55 views9 pages

Chapter 19

1) The documents record various transactions involving trading securities, interest income, cash, and unrealized gains/losses over multiple periods. 2) Transactions include purchases and sales of trading securities, recording of accrued interest and interest income earned, and recognition of unrealized gains or losses when the market value of securities changes. 3) Several problems show amortization schedules for bonds purchased at a premium or discount over their holding periods.

Uploaded by

GONZALES, MICA ANGEL A.
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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PROBLEM 19-1

JAN 1 Trading Securities 3,761

Cash 3761

JULY 1 Cash 240,000

Interest income 240,000

DEC 31 Accrued Interest income 240,000

Interest income 240,000

DEC 31 Trading securities 439,000

Unrealized gain- TS 439,000

(4200000-3761000)

PROBLEM 19-2

AUG 1 Trading securities 5,200,000 (5000000 *104)

Interest income 150,000 (5,000,000 * .12*3/12)

Cash 5,350,000

Aug 31 Trade Securities 1,960,000 (2,000,000 * .98)

Interest income 40,000 (2,000,000 *12*2/12)

Cash 2,000,000

Nov 1 Cash 300,000 (5,000,000*.12*2/12)

Interest income 300,000

Dec 1 Cash 2,060,000

Loss on Sale of TS 40,000

Trading securities 2,080,000

Interest income 20,000


Less: Cost of Bonds sold 2,080,000

Loss on sale -40,000

Dec 1 Cash 120,000

Interest income 120,000

2,000,000 *.12 * 6/12

Accrued Int receivable 60,000

Interest income 60,000

3,000,000 *12 * 2/12

Unrealized loss- TS 160,000

Trading securities 160,000

Carrying amount Market

Acme Bond 3,120,000 2,940,000

AVco Bonds 1,960,000 1,980,000

5,080,000 4,920,000– TS at FV

PROBLEM 19-3

Mar 1 Trading Securities 1,860,000

Interest income 20,000

Cash 1,880,000

2,000 * 1,000 * 93 = 1.860.000

2,000,000 *.12* 1/12= 20,000

April 1 Trading Securities 3,800,000

Interest Income 40,000

Cash 3,840,000

(4k*1k*95%)

(4M x 12% x 1/12)


1-Aug Cash 120,000

Interest Income 120,000

(2M*12%*6/12)

1-Sep Cash 240,000

Interest Income 240,000

(4M*12%86/12)

1-Oct ` Cash 1,060,000

Interest Income 10,000

Trading securities 950,000

Gain on sale of TS 100,000

Sales Price: (1M* 105%) 1,050,000

Less: Cost of Bond sold (1k/4k*3,800,000 -950,000

Gain on Sale 100,000

1-Dec Cash 2,080,000

Trading securities 1,860,000

Interest Income 80,000 (2M*12%*4/12)

Gain on sale of TS 140,000 (2M-1,860,000)

31-Dec Accrued Interest receivable 120,000 (3M*12%*4/12)

Interest Income 120,000

Unrealize Loss-TS 150,000 (2,850,000-2,700,000)

Trading securities 150,000

REQUIREMENT B

Current Asset:

Trading Securities at Trade Value: 2,700,000 (3M*90%)


PROBLEM 19-4

2021

1-Jul Trading Securities 2,200,000

Commission Expense 50,000

Interest Income 80,000 (2M*4%)

Cash 2,330,000

31-Dec Unrealized loss-TS 300,000

Trading Securities 300,000

Market Value(2M*95%) 1,900,000

Carrying Amount 2,200,000

Unrealized loss 300,000

Cash 160,000 (2,000,000*8%)

Interest Income 160,000

2022

31-Mar Cash 2,140,000

Trading Securities 1,900,000

Gain on Sale- TS 200,000

Interest Income 40,000 (2M*8%*3/12)

Problem 19-5

2021

1-Oct Investment in bonds 4,300,000

Interest Income 100,000

Cash 4,400,000

31-Dec Accrued Interest Receivable 200,000


Interest Income 12,000

Investment in bonds 12,000

10/21/2021- 01/01/2028 75 MONTHS

Cost (4.4M- 100k) 4,300,000

Face Value 4,000,000

Premium 300,000

Monthly Amortization (300k/75) 4,000

Amort (Oct 1-Dec 31,2021) 12,000 (4,000* 3)

2022

1-Jan Cash 200,000

Accrued Interest Receivable 200,000

1-Jul Cash 200,000 (4M*10%*6/12)

Interest Income 200,000

31-Dec Accrued Interest Receivable 200,000

Interest Income 200,000

Interest Income 48,000 (4k*12)

Investment in Bonds 48,000

PROBLEM 19-6

REQUIREMENT A

2021

1-May Investment in Bonds 5,640,000 (6M*94%)

Interest Income 180,000 (6M*12%*3/12)

Cash 5,820,000

1-Aug Cash 360,000


31-Dec Accrued Interest Receivable 300,000

Interest Income 300,000 (6M*12%*6/12)

Investment in Bonds 64,000

Interest Income 64,000

5/21/2021-2/1/2025 45 Months

Monthly Amortization 360k/45 8,000

May 1- Dec 31, 2021 8k*8 64,000

2022

1-Jan Interest Income 300,000

Accrued Interest Receivable 300,000

1-Feb Cash 360,000 (6M*12%*6/12)

Interest Income 360,000

1-Aug Cash 300,000

Interest Income 300,000

31-Dec Accrued Interest Receivable 300,000

Interest Income 300,000

Investment in bonds 96,000

Investment Income 96,000 (8k*12)

2023

1-Jan Interest Income 300,000

Accrued Interest Receivable 300,000

1-Feb Cash 360,000


1-May Investment in bonds 32,000

Interest Income 32,000 (8k*4)

Cash 6,480,000

Investment in bonds 5,832,000

Interest Income 180,000

Gain on sale of bonds 468,000

Sale price 6,300,000

Accrued interest(feb 1- may 1, 2023) 180,000 6M*12%*3/12

Total cash received 6,480,000

Cost 5,640,000

Amortization of discoun t 192,000 (8k*24)

(May 1, 2021- May 1,2023)

CA- May 1, 2023 5,832,000

Problem 19-7

REQUIREMENT A

Year Bond Outstanding Fraction Amortization

2021 1,000,000 10|30 50,000

2022 800,000 8|30 40,000

2023 600,000 6|30 30,000

2024 400,000 4|30 20,000

2025 200,000 2|30 10,000

3,000,000 150,000
REQUIREMENT B

2021

1-Jan Investment in bonds 1,150,000

Cash 1,150,000

30-Jun Cash 60,000

Interest Income 60,000 (1M*12%*6/12)

31-Dec Cash 60,000

Investment Income 60,000

Interest Income 50,000

Investment in bonds 50,000

Problem 19-8

REQUIREMENT A

Year Bond Outstanding Months outstanding Month Fraction Discount

Amort.

10/1/2021-2/1/2022 3,000,000 4 12,000,000 12|48 75,000

2/1/2022-2/1/2023 2,000,000 12 24,000,000 24|48 150,000

2/1/2023- 2/1/2024 1,000,000 12 12,000,000 12|48 75,000

48,000,000 300,000

REQUIREMENT B

2021

1-Oct Investment in bonds 2,700,000

investment income 60,000 (3M*12%*2/12)

Cash 2,760,000

31-Dec Accrued Interest receivable 150,000


Investment in bonds 56,250

Investment income 56,250 (75k*3/4)

2022

1-Jan Interest Income 150,000

Accrued Interest Receivable 150,000

1-Feb Cash 180,000 (3M*12%*6/12)

Interest Income 180,000

Cash 1,000,000

Investment in Bonds 1,000,000

1-Aug Cash 120,000 (2M*12%*6/12)

Interest Income 120,000

31-Dec Accrued Interest receivable 100,000

Interest Income 100,000 (2M*12%*5/12)

Investment in bonds 156,250

Interest Income 156,250

Jan 1- Feb 1, 2022 75,000*1/4 18,750

Feb 1- Dec 31, 2022 150,000*11/12 137,500

Total amort. For 2022 156,250

Problem 19-9

1. c

2. d

3. b

4. c

5. d

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