2. Johnson Company had the following transactions relating to-its-investments: (a) Grape's bonds On January 1, 2020, Joh

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2 Johnson Company Had The Following Transactions Relating To Its Investments A Grape S Bonds On January 1 2020 Joh 1 (248.92 KiB) Viewed 29 times

2. Johnson Company had the following transactions relating to-its-investments: (a) Grape's bonds On January 1, 2020, Johnson acquired a $100,000, 5%, five-year corporate bond issued by Grape Limited-for-cash. The bond was dated January 1, 2020-with-interest-paid-semi-annually on January 1 and July 1. The market rate of interest-was-8% at the time of purchase. The purchase of bonds was to park idle-cash-until-it-matures. All-interests for 2020-were paid on time. On December 31, 2020,-market-interest rate was-6.5%. On April 1, 2021, all the bonds were sold at 101-plus accrued interest. (d) Cherry's shares On March 31, 2020, Johnson acquired 1,500 shares of Cherry Limited at a price of $1,000 per share for cash. On May 15, 2020, Johnson acquired another 50 Cherry's shares at $1,200 per share for cash. The shares are classified as trading by Johnson. On July 18, 2020, dividends of $50 per share were received. On September 1, 2020, Johnson-sold-10-Cherry-shares-for-cash- at $1,300 per share. On December 31, 2020, total fair value of the Cherry shares had increased to $1,650,000.- لك (b) Papaya's bonds OnApril-1, 2020, Johnson acquired a $200,000, 6%, eight-year corporate bond issued by Papaya-Limited-for-cash. The bond was dated January 1, 2020-with-interest-paid-semi- annually on January 1-and-July-1.-Because the market-rate-of-interest-was-4%-on that date, issue price for the bond was $228,637 plus interest for the three months from 1 January to March 31, 2020. The bonds were classified as held-for-collection-and-sale by Johnson and had a fair value of $210,000 plus accrued interest on December 31, 2020. All-interests for 2020 were paid in full-ontime. (e) Farmer Corporation On July 1, 2020, Johnson purchased-45,000-shares-being 20% of the outstanding shares of Farmer Limited at a price of $15 per share. On December 31, 2020, the fair value of the Farmer shares had increased to $19.per share. Farmer had net income of $600,000 for the six-months ending this date, and declared and paid total dividends of $10,000-to-its- shareholders. . In-2021, market interest rates increased to 6%, thus causing further drop-in-Papaya's bonds. Alongside, Papaya-Limited faced a downturn-of-sales and-its-debt financing ability had. seriously deteriorated. Debt restructuring by Papaya-was-initiated and Johnson has revised the projected-semi-annual-coupon payments-by Papaya from $6,000 to $5,000, starting with payment of July 1, 2022. Redemption payment-remained unchanged. Impacts of all the aforesaid changes were reflected in value of Papaya's bonds on December 31, 2021. All interests for 2021 were paid in full-on-time. Prepare necessary journal entries for each category of investment to record the abovementioned transactions, and-fair-value-adjustments if applicable, in the relevant-years. Present your answers-for-each-item of investment separately, arranged-from-(a)-to-(e) as-in the question. Where appropriate, record fair value adjustments of share investments in one account, and those of bond investments in another account. الي On January 1, 2022, all the Papaya's bonds were sold for cash at $195,000.- (c) Coconut's shares On July 1, 2020, Johnson acquired-6,000 shares of Coconut Limited at a price of $25 per share for cash. The shares are classified as non-trading by Johnson. On December 31, 2020, dividends of $1.50 per share were declared-with-an-expected date of payment of January 15, 2021. On December 31, 2020, the-fair-value-ofthe-Coconut shares had increased to $28.per share. On-December 31, 2021, the fair value-of-the-Coconut-shares had decreased to $26 per share and all the shares were sold for cash on that day.