Problem 15-2A (Algo) Recording, adjusting, and reporting available-for-sale debt securities LO P3 Skip to question...
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Problem 15-2A (Algo) Recording, adjusting, and reporting available-for-sale debt securities LO P3
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Mead Incorporated began operations in Year 1. Following is a series of transactions and events involving its long-term debt investments in available-for-sale securities.
Year 1
January 20
Purchased Johnson & Johnson bonds for $28,500.
February 9
Purchased Sony notes for $62,640.
June 12
Purchased Mattel bonds for $48,500.
December 31
Fair values for debt in the portfolio are Johnson & Johnson, $31,100; Sony, $53,150 and Mattel, $56,950.
Year 2
April 15
Sold all of the Johnson & Johnson bonds for $31,500.
July 5
Sold all of the Mattel bonds for $41,450.
July 22
Purchased Sara Lee notes for $19,900.
August 19
Purchased Kodak bonds for $20,900.
December 31
Fair values for debt in the portfolio are Kodak, $22,125 Sara Lee, $20,000 and Sony, $64,000.
Year 3
February 27
Purchased Microsoft bonds for $159,600.
June 21
Sold all of the Sony notes for $64,000.
June 30
Purchased Black & Decker bonds for $58,400.
August 3
Sold all of the Sara Lee notes for $16,950.
November 1
Sold all of the Kodak bonds for $25,675.
December 31
Fair values for debt in the portfolio are Black & Decker, $59,400 and Microsoft, $160,200.
Problem 15-2A (Algo)
Required:
1. Prepare journal entries to record these transactions and the year-end fair value adjustments to the portfolio of long-term available-for-sale debt securities.
2. Complete the following table that summarizes the (a) total cost, (b) total fair value adjustment, and (c) total fair value of the portfolio of long-term available-for-sale debt securities at each year-end.
3. Complete the following table that summarizes (a) the realized gains and losses and (b) the unrealized gains or losses for the portfolio of long-term available-for-sale debt securities at each year-end
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