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Homework answers / question archive / Prepare entries to record the following non-strategic investment transactions of Arrowhead Investment Corporation

Prepare entries to record the following non-strategic investment transactions of Arrowhead Investment Corporation

Accounting

Prepare entries to record the following non-strategic investment transactions of Arrowhead Investment Corporation. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.)

2020    
Mar. 1   Paid $76,980 to purchase a $76,000, two-year, 8.0% bond payable of Action Corporation dated March 1. Interest is paid quarterly beginning June 1. Management intends to actively trade bond purchases.
Apr. 16   Bought 2,800 common shares of Brandon Motors at $28.00.
May 2   Paid $54,968 to purchase a five-year, 5.50%, $56,000 bond payable of Collingwood Corporation. Interest is paid annually each April 30.
June 1   Received a cheque from Action Corporation regarding quarterly interest.
Aug. 1   Brandon Motors’ board of directors declared a dividend of $0.75 per share to shareholders of record on August 10, payable August 15.
  15   Received the Brandon Motors dividend.
Sept. 1   Received a cheque from Action Corporation regarding quarterly interest.
  17   Purchased 26,600 Dauphin Inc. common shares at $3.90.
Oct. 20   Sold the Brandon Motors shares at $31.50.
Dec. 1   Received a cheque from Action Corporation regarding quarterly interest.
  1   Sold the Action Corporation bond at 101.
  31   Accrued interest on the Collingwood bond. The fair value of the equity security on this date was Dauphin, $4.20. The carrying value equalled the fair value for the Collingwood bond.
2021    
Apr. 30   Received a cheque from Collingwood Corporation regarding annual interest.

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Answer:

Journal Entries:

Date Account Titles and Explanation Debit Credit
Mar. 1, 2020 Investment in Bonds - Action Corporation $76,000  
  Discount Allowed ($76,980 - $76,000) $980  
     Cash   $76,980
  (To record the purchase of 8% bonds of Action Corporation)    
Apr. 16, 2020 Investment in Common Stock - Brandon Motors (2,800 * $28) $78,400  
     Cash   $78,400
  (To record the purchase of common shares of Brandon Motors for cash)    
May. 2, 2020 Investment in Bonds - Collingwood Corporation $56,000  
     Cash   $54,968
     Discount Received ($56,000 - $54,968)   $1,032
  (To record the purchase of 5.50% bonds of Collingwood Corporation)    
Jun. 1, 2020 Cash $1,520  
     Interest Revenue ($76,000*8/100*3/12 months)   $1,520
  (To record the receipt of interest on bonds from Action Corporation)    
Aug. 1, 2020 Dividends Receivable $2,100  
     Dividends Revenue (2,800 * $0.75 per share)   $2,100
  (To record the dividends receivable on the declaration from Brandon Motors)    
Aug. 15, 2020 Cash $2,100  
     Dividends Receivable   $2,100
  (To record the receipt of dividends from Brandon Motors)    
Sept. 1, 2020 Cash $1,520  
     Interest Revenue ($76,000*8/100*3/12 months)   $1,520
  (To record the receipt of interest on bonds from Action Corporation)    
Sept. 17, 2020 Investment in Common Stock - Dauphin Inc. (26,600 * $3.90) $103,740  
     Cash   $103,740
  (To record the purchase of common shares of Dauphin Inc. for cash)    
Oct. 20, 2020 Cash (2,800 * $31.50) $88,200  
     Investment in Common Stock - Brandon Motors (2,800 * $28)   $78,400
     Gain on sale of Investment ($31.50 - $28 = $3.50 * 2,800)   $9,800
  (To record the sale of common shares in Brandon Motors company with gain)    
Dec. 1, 2020 Cash $1,520  
     Interest Revenue ($76,000*8/100*3/12 months)   $1,520
  (To record the receipt of interest on bonds from Action Corporation)    
Dec. 1, 2020 Cash ($76,000*101/100) $76,760  
     Investment in Bonds - Action Corporation   $76,000
     Gain on sale of Investment ($76,760 - $76,000)   $760
  (To record the sale of 8% bonds of Action Corporation with gain)    
Dec. 31, 2020 Interest Receivable $2,053  
     Interest Revenue ($56,000*5.50/100*8/12 months)   $2,053
  (To record the receipt of interest on bonds from Collingwood Corporation)    
Dec. 31, 2020 Investment in Common Stock - Dauphin Inc. $7,980  
     Fair Value Adjustment ($4.20 - $3.90 = $0.30 * 26,600)   $7,980
  (To record fair value adjustment on common stock of Dauphin Inc.)    
Apr. 30, 2021 Cash ($56,000*5.50/100) $3,080  
      Interest Receivable   $2,053
      Interest Revenue ($56,000*5.50/100*4/12 months)   $1,027
  (To record the receipt of annual interest from Collingwood Corporation)