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BRIEF EXERCISE 17-2(a)Debt Investments (available-for-sale)74,086Cash74,086(b)Cash ($80,000 X .09) 7,200Debt Investments (available-for-sale) 949Interest Revenue ($74,086 X .11) 8,149(c)Fair Value Adjustment (available-for-sale) 465Unrealized Holding Gain or Loss—Equity?[($74,086 + $949) – $75,500]465EXERCISE 17-3 (15–20 minutes)(a)January 1, 2013Debt Investments322,744.44Cash322,744.44(b)Schedule of Interest Revenue and Bond Premium AmortizationEffective-Interest Method12% Bonds Sold to Yield 10%DateCash ReceivedInterest RevenuePremium AmortizedCarrying Amount of Bonds1/1/13———$322,744.4412/31/13$36,000$32,274.44$3,725.56319,018.8812/31/1436,00031,901.894,098.11314,920.7712/31/1536,00031,492.084,507.92310,412.8512/31/1636,00031,041.294,958.71305,454.1412/31/1736,00030,545.86**5,454.14300,000.00*Rounded by 45?.EXERCISE 17-3 (Continued)(c)December 31, 2013Cash36,000Debt Investments 3,725.56Interest Revenue 32,274.44(d)December 31, 2014Cash36,000Debt Investments4,098.11Interest Revenue31,901.89EXERCISE 17-4 (10–15 minutes)(a)January 1, 2013Debt Investments (available-for-sale)322,744.44Cash322,744.44(b)December 31, 2013Cash36,000Debt Investments (available-for-sale)3,725.56Interest Revenue ($322,744.44 X .10)32,274.44Fair Value Adjustment (available-for-sale)1,481.12Unrealized Holding Gain or Loss—Equity ($320,500.00 – $319,018.88)1,481.12(c)December 31, 2014Unrealized Holding Gain or Loss—Equity7,401.89Fair Value Adjustment (available-for-sale)7,401.89EXERCISE 17-4 (Continued)Amortized CostFair ValueUnrealized Gain (Loss)Available-for-sale bonds$314,920.77$309,000.00$(5,920.77)Previous fair value adjustment—Dr. 1,481.12Fair value adjustment—Cr.$(7,401.89)EXERCISE 17-6 (a)Fair Value Adjustment (trading)3,000Unrealized Holding Gain or Loss—Income3,000(b)Fair Value Adjustment (available-for-sale)3,000Unrealized Holding Gain or Loss—Equity3,000(c)The Unrealized Holding Gain or Loss—Income account is reported in the income statement under Other Revenues and Gains. The Unrealized Holding Gain or Loss—Equity account is reported as a part of other comprehensive income and as a component of stockholders’ equity until realized. The Securities Fair Value Adjustment account is added to the cost of the Debt Investment account to arrive at fair value. ................
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