CHAPTER 19

Problem 19-1

Date Particulars Debit Credit

2023
Jan. 1 Trading securities 3,760,000
Cash 3,760,000

July 1 Cash 240,000

Interest income 240,000

Dec. 31 Trading securities 440,000

Unrealized gain 440,000

FV (4,000,000 x 105% 4,200,000

CA 3,760,000
Unrealized gain 440,000

Accrued interest 240,000

Interest income 240,000

Problem 19-2
Requirement a
Date Particulars Debit Credit
2023
Aug. 1 Trading securities - Acme 5,200,000
Interest income 150,000
Cash 5,350,000

31 Trading securities - Avco 1,960,000

Interest income (2,000,000 x 12% x 2/12) 40,000
Cash 2,000,000

Nov. Cash 300,000

Interest income - Acme 300,000

Dec. 1 Cash 2,060,000

Loss on sale 40,000
Trading securities 2,080,000
Interest income 20,000

Computations
Sales price (2,000,000 x 102%) 2,040,000
Accrued interest (2,000,000 x 12% x 1/12) 20,000
Cash received 2,060,000

Sales price 2,040,000

CA of bonds sold (2,000,000/5,000,000 x 5,200,000) 2,080,000
Loss on sale 40,000

Dec. 31 Cash 120,000

Interest income - Avco 120,000
 Accrued interest 60,000
Interest income - Acme 60,000

Unrealized loss - Acme 180,000

Trading securities 180,000

Computations
MV (3,000,000 X 98%) 2,940,000
CA (5,200,000 - 2,080,000) 3,120,000
Unrealized loss 180,000

Trading securities - Avco 20,000

Unrealized gain 20,000

Computations
MV (2,000,000 X 99%) 1,980,000
CA 1,960,000
Unrealized loss 20,000

Requirement b
Market value - Acme 2,940,000
Market value - Avco 1,980,000
Current investment 4,920,000

Problem 19-3

Requirement a
Date Particulars Debit Credit
2023
Mar. 1 Trading securities (2,000,000 x 93%) - Long 1,860,000
Interest income (2,000,000 x 12% x 1/12) 20,000
Cash 1,880,000

Apr. 1 Trading securities - national 3,800,000

Interest income 40,000
Cash 3,840,000

Aug. 1 Cash - Long 120,000

Interest income 120,000

Sept. 1 Cash - National 240,000

Interest income 240,000

Oct. 1 Cash 1,060,000

Trading securities - National 950,000
Gain on sale 100,000
Interest income 10,000

Computation
Sales price (1,000,000 x 105%) 1,050,000
Accrued interest (1,000,000 x 12% x 1/12) 10,000
Cash received 160,000

Sales price 1,050,000

 CA (1,000,000/4,000,000 x 3,800,000) 950,000
Gain on sale 100,000

Dec. 1 Cash 2,080,000

Trading securities - Long 1,860,000
Interest income 80,000
Gain on sale 140,000

Computation:
Sales price (2,000,000 x 100%) 2,000,000
Accrued interest (2,000,000 x 12% x 4/12) 80,000
Cash received 2,080,000

Sales price 2,000,000

CA 1,860,000
Gain on sale 140,000

31 Accrued interest 120,000

Interest income 120,000

Unrealized loss 150,000

Trading securities 150,000

Computation:
MV (3,000,000 x 90%) 2,700,000
CA (3,800,000 - 950,000) 2,850,000
Unrealized loss 150,000

Requirement b
Trading securities (3,000,000 x 90%) 2,700,000

Problem 19-4
Date Particulars Debit Credit
2023
July 1 Trading securities 2,200,000
Commission expense 50,000
Interest income 80,000
Cash 2,330,000

Dec. 31 Cash 160,000

Interest income 160,000

Unrealized loss 300,000

Trading securities 300,000

Computation
MV (2,000,000 x 90%) 1,900,000
CA 2,200,000
Unrealized loss 300,000

2024
 Mar. 1 Cash 2,140,000
Trading securities 1,900,000
Interest income 40,000
Gain on sale 200,000

Computation
Sales price 2,100,000
Accrued interest (2,000,000 x 8% x 3/12) 40,000
Cash received 2,140,000

Sales price 2,100,000

CA 1,900,000
Gain on sale 200,000

Problem 19-5
Date Particulars Debit Credit
2023
Oct. 1 Investment in bonds 4,300,000
Interest income 100,000
Cash 4,400,000

Dec. 31 Accrued interest 200,000

Interest income 200,000

Interest income (4,000 x 3) 12,000

Investment in bond 12,000

Life of the bond 75 months

Monthly amortization (300,000/75) 4,000

October 1, 2023 4,300,000 Dec. 31, 2023 Amortization 12,000

Dec. 31, 2024 Amortization 48,000
Dec. 31, 2025 Amortization 48,000
Dec. 31, 2026 Amortization 48,000
Dec. 31, 2027 Amortization 48,000
Dec. 31, 2028 Amortization 48,000
Dec. 31, 2029 Amortization 48,000
4,300,000 Balance Jan. 1, 2030 4,000,000
4,300,000

2024
Jan. 1 Cash 200,000
Interest income 200,000

July 1 Cash 200,000

Interest income 200,000

Dec. 31 Accrued interest 200,000

Interest income 200,000

Interest income (4,000 x 12) 48,000

Investment in bond 48,000
Problem 19-6
Date Particulars Debit Credit
2023
May 1 Investment in bonds 5,640,000
Interest income 180,000
Cash 5,820,000

Aug. 1 Cash 360,000

Interest income 360,000

Dec. 31 Accrued interest 300,000

Interest income 300,000

Investment in bonds 64,000

Interest income 64,000

Computation
Face amount 6,000,000
Cost 5,640,000
Discount 360,000

Life of the bond 45 months

Monthly amortization (360,000/45) 8,000

May 1, 2023 Cost 5,640,000 February 1, 2027 6,000,000

Dec. 31, 2023 Amortization 64,000
Dec. 31, 2024 Amortization 96,000
Dec. 31, 2025 Amortization 96,000
Dec. 31, 2026 Amortization 96,000
Feb. 1, 2027 Amortization 8,000
6,000,000 6,000,000

2024
Jan. 1 Interest income 300,000
Accrued interest 300,000

Feb. 1 Cash 360,000

Interest income 360,000

Aug. 1 Cash 360,000

Interest income 360,000

Dec. 31 Accrued interest 300,000

Interest income 300,000

Investment in bonds 96,000

Interest income 96,000

2025
Jan. 1 Interest income 300,000
Accrued interest 300,000

May 1 Investment in bonds (8,000 x 4) 32,000

 Interest income 32,000

Cash 6,480,000
Investment in bonds 5,832,000
Interest income 180,000
Gain on sale 468,000

Computation
Sales price (6,000,000 x 105%) 6,300,000
Accrued interest (6,000,000 x 12% x 3/12) 180,000
Cash received 6,480,000

Sales price 6,300,000

CA 5,832,000
Gain on sale 468,000

Problem 19-7

Year Bonds outstanding Fraction Premium amortization

2023 5,000,000 5/15 250,000
2024 4,000,000 4/15 200,000
2025 3,000,000 3/15 150,000
2026 2,000,000 2/15 100,000
2027 1,000,000 1/15 50,000
15,000,000 750,000

Date Particulars Debit Credit

2023
Jan. 1 Investment in bonds 5,750,000
Cash 5,750,000

June 30 Cash 300,000

Interest income 300,000

Dec. 31 Cash 300,000

Interest income 300,000

Interest income 250,000

Investment in bonds 250,000

Cash 1,000,000
Investment in bonds 1,000,000

Problem 19-8
Year Bonds outstanding Months outstanding Discount
amortization
2024 3,000,000 (Oct. 1, 2023 - Feb. 1, 2024) 4 12,000,000 12/48 75,000
2025 2,000,000 (02/01/24 - 02/01/25) 12 24,000,000 24/48 150,000
2026 1,000,000 (02/01/25 - 02/01/26) 12 12,000,000 12/48 75,000
6,000,000 48,000,000 300,000

Date Particulars Debit Credit

2023
Oct. 1 Investment in bonds 2,700,000
Interest income (3,000,000 x 12% x 2/12) 60,000
Cash 2,760,000

Dec. 31 Accrued interest 150,000

Interest income (3,000,000 x 12% x 5/12) 150,000

Investment in bonds (75,000 x 3/4) 56,250

Interest income 56,250

2024
Jan. 1 Interest income 150,000
Accrued interest 150,000

Feb. 1 Cash 180,000

Interest income 180,000

Cash 1,000,000
Investment in bonds 1,000,000

Aug. 1 Cash 120,000

Interest income 120,000

Dec. 31 Accrued interest 100,000

Interest income (2,000,000 x 12% x 5/12) 100,000

Investment in bonds 156,250

Interest income 156,250

Computation
From Jan. 1 to Feb. 1 (75,000 x 1/4) 18,750
From Feb. 1 to Dec. 31 (150,000 x 11/12) 137,500
Total amortization 156,250