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 1January 20Purchased Johnson & Johnson bonds for $25,000.February 9Purchased Sony notes for $59,490.June 12Purchased Mattel bonds for $45,000.December 31Fair values for debt in the portfolio are Johnson & Johnson, $26,900; Sony, $49,050; and Mattel, $55,950.Year 2April 15Sold all of the Johnson & Johnson bonds for $28,000.July 5Sold all of the Mattel bonds for $39,000.July 22Purchased Sara Lee notes for $17,100.August 19Purchased Kodak bonds for $18,450.December 31Fair values for debt in the portfolio are Kodak, $18,900; Sara Lee, $16,500; and Sony, $63,000.Year 3February 27Purchased Microsoft bonds for $161,000.June 21Sold all of the Sony notes for $61,200.June 30Purchased Black & Decker bonds for $54,900.August 3Sold all of the Sara Lee notes for $13,800.November 1Sold all of the Kodak bonds for $23,400.December 31Fair values for debt in the portfolio are Black & Decker, $57,300; and Microsoft, $159,500.1. 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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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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 $25,000.
February 9	Purchased Sony notes for $59,490.
June 12	Purchased Mattel bonds for $45,000.
December 31	Fair values for debt in the portfolio are Johnson & Johnson, $26,900; Sony, $49,050; and Mattel, $55,950.

Year 2

April 15	Sold all of the Johnson & Johnson bonds for $28,000.
July 5	Sold all of the Mattel bonds for $39,000.
July 22	Purchased Sara Lee notes for $17,100.
August 19	Purchased Kodak bonds for $18,450.
December 31	Fair values for debt in the portfolio are Kodak, $18,900; Sara Lee, $16,500; and Sony, $63,000.

Year 3

February 27	Purchased Microsoft bonds for $161,000.
June 21	Sold all of the Sony notes for $61,200.
June 30	Purchased Black & Decker bonds for $54,900.
August 3	Sold all of the Sara Lee notes for $13,800.
November 1	Sold all of the Kodak bonds for $23,400.
December 31	Fair values for debt in the portfolio are Black & Decker, $57,300; and Microsoft, $159,500.

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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