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Cardinal Paz Corp. carries an account in its general ledger called Investments, which contained debits for investments purchases, and no credits, with the following descriptions.2/1/10 Sharapova Company common stock, $100 par, 200 shares. –$37,4004/1/10 U.S. government bonds, 11%, due April 1, 2020,interest payable April 1, and October 1, 110 bonds of $1000 par each. –$110,0007/1/10 McGrath Company 12% bonds, par $50,000 dated March 1, 2010 purchased at 104 plus accrued interest, interest payable annually on March 1, due March 1, 2030. –$54,000Instructions(a) Prepare entries necessary to classify the amounts into proper accounts, assuming that all the securities are classified as available-for-sale.(b) Prepare the entry to record the accrued interest and the amortization of premium on December 31, 2010 using the straight-line method.(c) The fair values of the securities on December 31, 2010, were:Sharapova Company common stock $31,800U.S. government bonds 124,700McGrath Company bonds 58,600(d) The U.S. government bonds were sold on July 1, 2011, for $119,200 plus accrued interest. Give the proper entry.
ANSWER TO PART (a)Investment in Sharapova a/cTo BankInvestment in Government Bond a/cInterest Receivable a/cTo Bank a/c drdrdr 37400374001068183182110000 Investment in Mcgrath a/cdr…
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