Chapter 9
Investments
460
AP-5B (
1
2
)
On July 1, 2016, Landmark Company, a public company, decided to buy $140,000 worth of
10-year bonds at par with an annual interest rate of 7%, issued by a private company. Interest
is paid semi-annually on January 1 and July 1. The company intends to trade the bonds within
the next two years. Landmark Company records the bonds using fair value through profit and
loss method. The company’s year-end is on November 30.
Required
a) Record acquisition of the bonds.
Date
Account Title and Explanation
Debit
Credit
b) Assume that on November 30, 2016, the market value of the bonds increased to $145,000
due to a change of market interest rate. Prepare journal entries to make the adjustment on
this date. You do not need to record the interest accrued for this question.
Date
Account Title and Explanation
Debit
Credit
