Question

Item 3Item 3 On January 1, 2018, Hoosier Company purchased $922,000 of 10% bonds at face value. The bond market value was $976,000 on December 31, 2018. Required: Prepare the appropriate journal entry on December 31, 2018, to properly value the bonds assuming the bonds are classified as

Answer 1

Note: The missing last part of the question is as follows

"(1.) Trading securities.

(2.) Securities available for sale.

(3.) Held-to-maturity securities"

Solution

1. Journal Entries - Hoosier Company

Date Particulars Debit Credit

31-Dec-18 Fair value adjustment $54,000

To Unrealized holding $54,000

gain or loss - NI

(To adjust bond investment held for trading to fair value)

2. Journal Entries - Hoosier Company

Date Particulars Debit Credit

31-Dec-18 Fair value adjustment $54,000

To Unrealized holding $50,000

gain or loss - OCI

(To adjust bond investment available for sale to fair value)

3. Journal Entries - Hoosier Company

Date Particulars Debit Credit

31-Dec-18 No Journal Entry Required