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At the end of 2018, Terry Company prepared the following schedule of investments in available-for-sale debt...

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Accounting

At the end of 2018, Terry Company prepared the followingschedule of investments in available-for-sale debt securities:

Company

Amortized Cost

12/31/18 Fair Value

Cumulative Change in Fair Value

Morgan Company$30,000$29,200$(800)
Nance Company50,00053,2003,200
Totals$80,000$82,400$2,400

During 2019, the following transactions occurred:

July 1Purchased Oscar Company debt securities with a par value of100,000 for $98,000. The securities carry an annual interest rateof 10%, mature on July 1, 2024, and pay interest seminannually onJuly 1 and December 31. Terry uses the straight-line method toamortize any discounts or premiums.
Oct. 11Sold all of the Morgan Company securities for $28,000 plusinterest of $1,400.
Dec. 31Received interest of $6,000 on the Nance Company and OscarCompany debt securities, and the following yearend total marketvalues were available: Nance Company debt securities, $54,000;Oscar Company debt securities, $96,000.

Required:

1.Prepare journal entries to record the precedinginformation.
2.Show how the preceding items are reported on Terry’s December31, 2019, balance sheet. Assume all investments arenoncurrent.

Answer & Explanation Solved by verified expert
4.0 Ratings (801 Votes)
1 Journal Entries in the books of Terry company for the year ended 31122019 July 1 10 Oscar company debt securities Dr 100000 To Bank Ac 98000 To Discount on debt securities 2000 Being Oscar company debt securities    See Answer
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