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Soto Industries Inc. is an athletic footware company that began operations on January 1, Year 1. The following transactions relate to debt investments acquired by Soto Industries Inc., which has a fiscal year ending on December 31:
Record these transactions on page 10
Year 1 Apr. 1. Purchased $100,000 of Welch Co. 6%, 15-year bonds at their face amount plus accrued interest of $500. The bonds pay interest semiannually on March 1 and September 1. June 1. Purchased $210,000 of Bailey 4%, 10-year bonds at their face amount plus accrued interest of $700. The bonds pay interest semiannually on May 1 and November 1. Sept. 1. Received semiannual interest on the Welch Co. bonds. 30. Sold $40,000 of Welch Co. bonds at 97 plus accrued interest of $200. Nov. 1. Received semiannual interest on the Bailey bonds. Dec. 31 Accrued $1,200 interest on the Welch Co. bonds. 31 Accrued $1,400 interest on the Bailey bonds.
Record these transactions on page 11
Year 2 Mar. 1 Received semiannual interest on the Welch Co. bonds. May 1 Received semiannual interest on the Bailey bonds.
Required:
1. Journalize the entries to record these transactions. Refer to the information given and the Chart of Accounts provided for the exact wording of the answer choices for text entries. 2. If the bond portfolio is classified as available for sale, what impact would this have on financial statement disclosure?
X
Journal
Shaded cells have feedback.
CHART OF ACCOUNTSSoto Industries Inc.General Ledger
ASSETS 110 Cash 111 Petty Cash 120 Accounts Receivable 121 Allowance for Doubtful Accounts 131 Notes Receivable 132 Interest Receivable 141 Merchandise Inventory 145 Office Supplies 146 Store Supplies 151 Prepaid Insurance 161 Investments-Welch Co. Bonds 162 Investments-Bailey Bonds 165 Valuation Allowance for Trading Investments 166 Valuation Allowance for Available-for-Sale Investments 181 Land 191 Store Equipment 192 Accumulated Depreciation-Store Equipment 193 Office Equipment 194 Accumulated Depreciation-Office Equipment
LIABILITIES 210 Accounts Payable 221 Notes Payable 231 Interest Payable 241 Salaries Payable 251 Sales Tax Payable
EQUITY 311 Common Stock 312 Paid-In Capital in Excess of Par-Common Stock 321 Preferred Stock 322 Paid-In Capital in Excess of Par-Preferred Stock 331 Treasury Stock 332 Paid-In Capital from Sale of Treasury Stock 340 Retained Earnings 350 Unrealized Gain (Loss) on Available-for-Sale Investments 351 Cash Dividends 352 Stock Dividends 390 Income Summary
REVENUE 410 Sales 611 Interest Revenue 612 Dividend Revenue 631 Gain on Sale of Investments 641 Unrealized Gain on Trading Investments
EXPENSES 511 Cost of Merchandise Sold 512 Bad Debt Expense 515 Credit Card Expense 516 Cash Short and Over 520 Salaries Expense 531 Advertising Expense 532 Delivery Expense 533 Repairs Expense 534 Selling Expenses 535 Rent Expense 536 Insurance Expense 537 Office Supplies Expense 538 Store Supplies Expense 561 Depreciation Expense-Store Equipment 562 Depreciation Expense-Office Equipment 590 Miscellaneous Expense 710 Interest Expense 731 Loss on Sale of Investments 741 Unrealized Loss on Trading Investments
Soto Industries Inc. is an athletic footware company that began operations on January 1, Year 1. The following transactions relate to debt investments acquired by Soto Industries Inc., which has a fiscal year ending on December 31:
Record these transactions on page 10
| Year 1 | ||
|---|---|---|
| Apr. | 1. | Purchased $100,000 of Welch Co. 6%, 15-year bonds at their face amount plus accrued interest of $500. The bonds pay interest semiannually on March 1 and September 1. |
| June | 1. | Purchased $210,000 of Bailey 4%, 10-year bonds at their face amount plus accrued interest of $700. The bonds pay interest semiannually on May 1 and November 1. |
| Sept. | 1. | Received semiannual interest on the Welch Co. bonds. |
| 30. | Sold $40,000 of Welch Co. bonds at 97 plus accrued interest of $200. | |
| Nov. | 1. | Received semiannual interest on the Bailey bonds. |
| Dec. | 31 | Accrued $1,200 interest on the Welch Co. bonds. |
| 31 | Accrued $1,400 interest on the Bailey bonds. |
Record these transactions on page 11
| Year 2 | ||
|---|---|---|
| Mar. | 1 | Received semiannual interest on the Welch Co. bonds. |
| May | 1 | Received semiannual interest on the Bailey bonds. |
Required:
| 1. | Journalize the entries to record these transactions. Refer to the information given and the Chart of Accounts provided for the exact wording of the answer choices for text entries. |
| 2. | If the bond portfolio is classified as available for sale, what impact would this have on financial statement disclosure? |
X
Journal
Shaded cells have feedback.
CHART OF ACCOUNTSSoto Industries Inc.General Ledger
| ASSETS | |
| 110 | Cash |
| 111 | Petty Cash |
| 120 | Accounts Receivable |
| 121 | Allowance for Doubtful Accounts |
| 131 | Notes Receivable |
| 132 | Interest Receivable |
| 141 | Merchandise Inventory |
| 145 | Office Supplies |
| 146 | Store Supplies |
| 151 | Prepaid Insurance |
| 161 | Investments-Welch Co. Bonds |
| 162 | Investments-Bailey Bonds |
| 165 | Valuation Allowance for Trading Investments |
| 166 | Valuation Allowance for Available-for-Sale Investments |
| 181 | Land |
| 191 | Store Equipment |
| 192 | Accumulated Depreciation-Store Equipment |
| 193 | Office Equipment |
| 194 | Accumulated Depreciation-Office Equipment |
| LIABILITIES | |
| 210 | Accounts Payable |
| 221 | Notes Payable |
| 231 | Interest Payable |
| 241 | Salaries Payable |
| 251 | Sales Tax Payable |
| EQUITY | |
| 311 | Common Stock |
| 312 | Paid-In Capital in Excess of Par-Common Stock |
| 321 | Preferred Stock |
| 322 | Paid-In Capital in Excess of Par-Preferred Stock |
| 331 | Treasury Stock |
| 332 | Paid-In Capital from Sale of Treasury Stock |
| 340 | Retained Earnings |
| 350 | Unrealized Gain (Loss) on Available-for-Sale Investments |
| 351 | Cash Dividends |
| 352 | Stock Dividends |
| 390 | Income Summary |
| REVENUE | |
| 410 | Sales |
| 611 | Interest Revenue |
| 612 | Dividend Revenue |
| 631 | Gain on Sale of Investments |
| 641 | Unrealized Gain on Trading Investments |
| EXPENSES | |
| 511 | Cost of Merchandise Sold |
| 512 | Bad Debt Expense |
| 515 | Credit Card Expense |
| 516 | Cash Short and Over |
| 520 | Salaries Expense |
| 531 | Advertising Expense |
| 532 | Delivery Expense |
| 533 | Repairs Expense |
| 534 | Selling Expenses |
| 535 | Rent Expense |
| 536 | Insurance Expense |
| 537 | Office Supplies Expense |
| 538 | Store Supplies Expense |
| 561 | Depreciation Expense-Store Equipment |
| 562 | Depreciation Expense-Office Equipment |
| 590 | Miscellaneous Expense |
| 710 | Interest Expense |
| 731 | Loss on Sale of Investments |
| 741 | Unrealized Loss on Trading Investments |
Beverley SmithLv2
29 Sep 2019
