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 |
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Sharapova Company common stock, $101 par, 202 shares |
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$38,500 |
| April 1 |
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U.S. government bonds, 10%, due April 1, 2022, interest payable April 1 and October 1, 113 bonds of $1,000 par each |
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113,000 |
| July 1 |
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McGrath Company 12% bonds, par $55,400, dated March 1, 2012, purchased at 104 plus accrued interest, interest payable annually on March 1, due March 1, 2032 |
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59,832 |
(a) Prepare entries necessary to classify the amounts into proper accounts, assuming that all the securities are classified as available-for-sale. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
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Account Titles and Explanation
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Debit
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Credit
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(b) Prepare the entry to record the accrued interest and the amortization of premium on December 31, 2012, using the straight-line method. (Round answers to 0 decimal places, e.g. $2,500. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
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Account Titles and Explanation
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Debit
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Credit
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(c) The fair values of the investments on December 31, 2012, were:
| Sharapova Company common stock |
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$35,070 |
| U.S. government bonds |
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145,500 |
| McGrath Company bonds |
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63,900 |
What entry or entries, if any, would you recommend be made? (Round answers to 0 decimal places, e.g. $2,500. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
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Account Titles and Explanation
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Debit
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Credit
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(d) The U.S. government bonds were sold on July 1, 2013, for $120,810 plus accrued interest. Give the proper entry. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
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Account Titles and Explanation
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Debit
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Credit
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