The following are various transactions that relate to the investment portfolio for Zeus Corp., a publically traded corporation. The portfolio is made up of debt and equity instruments all purchased in the current year and accounted for as held-for-trading (HFT). The investee’s year-end is December 31.
a. On February 1, the company purchased Xtra Corp. 12% bonds, with a par value of $500,000, at 106.5 plus accrued interest to yield 10%. Interest is payable April 1 and October 1.
b. On April 1, semi-annual interest was received on the Xtra bonds.
c. On July 1, 9% bonds of Vericon Ltd. were purchased. These bonds, with a par value of $200,000, were purchased at 101 plus accrued interest to yield 8.5%. Interest dates are June 1 and December 1.
d. On August 12, 3,000 shares of Bretin ACT Corp. were acquired at a cost of $59 per share. A 1% commission was paid.
e. On September 1, Xtra Corp. bonds with a par value of $100,000 were sold at 104 plus accrued interest.
f. On September 28, a dividend of $0.50 per share was received on the Bretin ACT Corp. bonds.
g. On October 1, semi-annual interest was received on the remaining Xtra Corp. bonds.
h. On December 1, semi-annual interest was received on the Vericon Ltd. bonds.
i. On December 28, a dividend of $0.52 per share was received on the Bretin ACT Corp. shares.
j. On December 31, the following fair values were determined: Xtra Corp. 101.75; Vericon Ltd. bonds 97; and Bretin ACT Corp. shares $60.50.
Required: Prepare the journal entries for each of the items (a) to (j) above. The company wishes to record interest income separately from other investment gains and losses.
