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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. (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. |
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) |