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Q.11E_2

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Horngren'S Financial And Managerial Accounting
Found in: Page 569

Short Answer

Question: E10-11 Accounting for debt investments

Peyton Investments completed the following investment transactions during 2018:

2018

Jan. 5 Purchased Vedder Company’s $400,000 bond at face value. Peyton classified the investment as available-for-sale. The Vedder bond pays interest at the annual rate of 4% on June 30 and December 31 and matures on December 31, 2021. Management’s intent is to keep the bonds for several years.

Jun. 30 Received an interest payment from Vedder.

Dec. 31 Received an interest payment from Vedder.

31 Adjusted the investment to its current market value of $396,000

Requirements

2. Prepare a partial balance sheet for Peyton’s Vedder investment as of December 31, 2018.

Answer

Particular

Amount $

Assets:

Available for sale – Debt investment

$396,000

Equity:

Other comprehensive income

($4,000)

See the step by step solution

Step by Step Solution

Step 1: Definition of Balance Sheet

The financial statement of the business entity that is used to report all the assets and liabilities of each type is known as a balance sheet. It classifies all of the obligations and resources as long-term and short-term.

Step 2: Partial balance sheet

  1. Available for sale securities are reported on the asset side on their fair value. Its classification as current and non-current depends upon management.
  2. The unrealized loss will be reported in the equity section as other comprehensive income.

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