Question - Available-for-Sale and Held-to-Maturity Debt Securities Entries
The following information relates to the debt securities investments of Wild Company.
1. On the February 1, the company purchased 10% bonds of Gibbons Co. having a par value of $300,000 at 100 plus accrued interest. Interest is payable April 1 and October 1.
2. On April 1, semiannual interest is received.
3. On July 1, 9% bonds of Sampson, Inc. were purchased. These bonds with a per value of $200,000 were purchased at 100 plus accrued interest. Interest dates are June 1 and October 1.
4. On September 1, bonds with a per value of $60,000, purchased on February 1, are sold at 99 plus accrue interest.
5. On October 1, semiannual interest is received.
6. On December 1, semiannual interest is received.
7. On December 31, the fair value of the bonds purchased February 1 and July 1 are 95 and 93 respectively.
Instructions
(a) Prepare my journal entries you consider necessary, including year-end entries (December 31), as summing these are available-for-sale securities.
(b) If Wild classified these as held-to-maturity securities, explain how the journal entries would differ from those in part (a).