$1\mathrm{.}42$

points

eBookReferencesCheck my workCheck My Work button is now enabledItem $3$

Company A purchased $$3,000,000$ of Company B$,5\%$ bonds at par on July $1,$ Year $1,$ with interest paid semi$-$annually. Company A determined that it should account for the bonds as an available$-$for$-$sale investment. At December $31,$ Year $1,$ the Company B bonds had a fair value of $$3,400,000.$ Company A sold the Company B bonds on July $1,$ Year $2$ for $$2,700,000.$

Required:

Prepare Company A$\text{'}$s journal entries for the following transactions:

The purchase of the Company B bonds on July $1.$

Interest revenue for the last half of Year $1.$

Any year$-$end Year $1$ adjusting entries.

Interest revenue for the first half of Year $2.$

Any entries necessary upon sale of the Company B bonds on July $1,$ Year $2,$ including updating the fair$-$value adjustment, recording any reclassification adjustment, and recording the sale.

Complete the following table to show the effect of the Company B bonds on Company A$\text{'}$s net income, other comprehensive income, and comprehensive income for Year $1,$ Year $2,$ and cumulatively over Year $1$ and Year $2.$