Questions: On January 1, 2024, Bella's Restaurant decides to invest excess cash of 56,200 from the tourist season by purchasing a Buffalo, Inc, bond at face value. At year-end, December 31, 2024, Buffalo's bond had a market value of 51,400. The investment is categorized as an available-for-sale debt investment and will be held for the short-term.

Solution Steps

To journalize the transactions for Bella's investment in Buffalo, Inc. for 2024, we need to record the initial investment on January 1, 2024, and then adjust for the change in market value at year-end, December 31, 2024.

1. On January 1, 2024, Bella's Restaurant purchases the bond at face value.
2. On December 31, 2024, we need to adjust the investment to its market value, recognizing an unrealized loss since the market value decreased.

On January 1, 2024, Bella's Restaurant invests \$56,200 in Buffalo, Inc. bonds. This transaction is recorded as follows:

• Debit: Investment in Buffalo, Inc. bond \( = 56200 \)
• Credit: Cash \( = 56200 \)

At year-end, December 31, 2024, the market value of the bond is \$51,400. To adjust for the decrease in value, we calculate the unrealized loss:

\[ \text{Unrealized Loss} = \text{Initial Investment} - \text{Market Value} = 56200 - 51400 = 4800 \]

This unrealized loss is recorded as follows:

• Debit: Unrealized Loss on Investment \( = 4800 \)
• Credit: Investment in Buffalo, Inc. bond \( = 4800 \)

Final Answer