Cheese Farms is a grower of hybrid seed corn for Mukenthaler Genetics Corporation. It has had two

Question:

Cheese Farms is a grower of hybrid seed corn for Mukenthaler Genetics It has had two exceptionally good years and has elected to invest its excess funds in bonds. The selected transactions, shown on the next page, relate to bonds acquired as an investment by Cheese Farms, whose fiscal year ends on December 31.
2014
Jan. 1 Purchased at $400,000 of Wilkerson 10-year, 9% bonds dated January 1, 2014, directly from the issuing 1 Received the semiannual interest on the Wilkerson bonds.
Dec. 31 Accrual of interest at year-end on the Wilkerson bonds.
(Assume that all intervening transactions and adjustments have been properly recorded and the number of bonds owned has not changed from December 31, 2014, to December 31, 2016.)
2017
Jan. 1 Received the semiannual interest on the Wilkerson bonds.
Jan. 1 Sold $200,000 of Wilkerson bonds at 114.
July 1 Received the semiannual interest on the Wilkerson bonds.
Dec. 31 Accrual of interest at year-end on the Wilkerson bonds.

Instructions
(a) Journalize the listed transactions for the years 2014 and 2017.
(b) Assume that the fair value of the bonds at December 31, 2014, was $385,000. These bonds are classified as available-for-sale securities. Prepare the adjusting entry to record these bonds at fair value.
(c) Based on your analysis in part (b), show the presentation of the bonds and interest receivable at December 31, 2014. Assume the investments are considered long-term. Indicate where any unrealized gain or loss is reported in the financial statements.

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