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 $20,500. February 9 Purchased Sony notes for $55,440. June 12 Purchased Mattel bonds for $40,500. December 31 Fair values for debt in the portfolio are Johnson & Johnson, $21,500; Sony, $52,500; and Mattel, $46,350. Year 2 April 15 Sold all of the Johnson & Johnson bonds for $23,500. July 5 Sold all of the Mattel bonds for $35,850. July 22 Purchased Sara Lee notes for $13,500. August 19 Purchased Kodak bonds for $15,300. December 31 Fair values for debt in the portfolio are Kodak, $17,325; Sara Lee, $12,000; and Sony, $60,000. Year 3 February 27 Purchased Microsoft bonds for $160,800. June 21 Sold all of the Sony notes for $57,600. June 30 Purchased Black & Decker bonds for $50,400. August 3 Sold all of the Sara Lee notes for $9,750. November 1 Sold all of the Kodak bonds for $20,475. December 31 Fair values for debt in the portfolio are Black & Decker, $54,600, and Microsoft, $158,600. 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.

Financial Accounting

15th Edition

ISBN:9781337272124

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter15: Investments And Fair Value Accounting

Section: Chapter Questions

Problem 1PB: Rekya Mart Inc. is a general merchandise retail company that began operations on January 1, Year 1....

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Question

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 $20,500.
February 9	Purchased Sony notes for $55,440.
June 12	Purchased Mattel bonds for $40,500.
December 31	Fair values for debt in the portfolio are Johnson & Johnson, $21,500; Sony, $52,500; and Mattel, $46,350.

Year 2

April 15	Sold all of the Johnson & Johnson bonds for $23,500.
July 5	Sold all of the Mattel bonds for $35,850.
July 22	Purchased Sara Lee notes for $13,500.
August 19	Purchased Kodak bonds for $15,300.
December 31	Fair values for debt in the portfolio are Kodak, $17,325; Sara Lee, $12,000; and Sony, $60,000.

Year 3

February 27	Purchased Microsoft bonds for $160,800.
June 21	Sold all of the Sony notes for $57,600.
June 30	Purchased Black & Decker bonds for $50,400.
August 3	Sold all of the Sara Lee notes for $9,750.
November 1	Sold all of the Kodak bonds for $20,475.
December 31	Fair values for debt in the portfolio are Black & Decker, $54,600, and Microsoft, $158,600.

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.

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