How to record long-term investments


Response to the following questions:

1. Where are unrealized gains and losses on available-for-sale securities reported?

2. Under what circumstances are long-term investments in debt securities reported at cost and adjusted for amortization of any difference between cost and maturity value?

3. On February 1, 2011, Charo Mendez purchased 6% bonds issued by CR Utilities at a cost of $30,000, which is their par value. The bonds pay interest semiannually on July 31 and January 31. For 2011, prepare entries to record Mendez's July 31 receipt of interest and its December 31 year-end interest accrual.

 

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Accounting Basics: How to record long-term investments
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