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Statement of Financial Accounting Standards No. 130 - page 56 / 57

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56 / 57

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139.  The following before-tax entries would be made to record the

purchase, accrue interest (using the effective interest method based on

cost), recognize the change in fair value, and record the sale:

December 31, 1997:

Investment in bonds                            $1,073,000

    Cash                                                      $1,073,000

To record purchase of bond

December 31, 1998:

Cash                                               80,000

    Investment in bonds                                           10,255

    Interest income (to earnings)                                 69,745

To record interest income on the  bond,

 amortize the premium, and record cash received

Unrealized holding loss (to OCI)                  101,745

    Investment in bonds                                          101,745

To adjust carrying amount of bond to fair value

Accumulated OCI                                   101,745

    Unrealized holding loss                                      101,745

Interest income                                    69,745

    Retained earnings                                             69,745

To close nominal accounts to real accounts

 at year-end

December 31, 1999:

Cash                                               80,000

    Investment in bonds                                           10,922

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