Question

On July 2, 19X2, Wynn, Inc., purchased as an available-for-sale security a $1,000,000 face value Kean Co. 8% bond for $910,000 plus accrued interest to yield 10%. The bonds mature on January 1, 19X9, and pay interest annually on January 1. On December 31, 19X2, the bonds had a market value of $945,000. On February 13, 19X3, Wynn sold the bonds for $920,000. In its December 31, 19X2, balance sheet, what amount should Wynn report for available-for-sale investments in debt securities?

Answer 1

Step-by-step explanation:

Answer:

investment on debt securities 945,000

Explanation:

purchase for 910,000 the bond + interest accrued

1,000,000 x 0.08 /2 = 40,000 interest revenue

910,000 - 40,000 = 870,000 investment on bonds

At year-end we should adjsut the bond to the market value:

945,000 - 870,000 = 75,000

investment in debt securities 75,000

unrealized gain on securities 75,000

Balance sheet:

investment on debt securities 945,000

Answer 2

investment on debt securities 945,000

Step-by-step explanation:

purchase for 910,000 the bond + interest accrued

1,000,000 x 0.08 /2 = 40,000 interest revenue

910,000 - 40,000 = 870,000 investment on bonds

At year-end we should adjsut the bond to the market value:

945,000 - 870,000 = 75,000

investment in debt securities 75,000

unrealized gain on securities 75,000

Balance sheet:

investment on debt securities 945,000