Strawder Farms is a grower of hybrid seed corn for DeKalb Genetics Corporation. It Journalize debt investment has had two exceptionally good years and has elected to invest its excess funds in bonds. The transactions and show finanfollowing selected transactions relate to bonds acquired as an investment by Strawder Farms, cial statement presentation.

whose fiscal year ends on December 31. (SO 2, 5, 6)

2006 Jan. Purchased at par $800,000 of Lesley Corporation 10-year, 9% bonds dated January 1, 2006. directly from the issuing corporation.

July 1 Received the semiannual interest on the Lesley bonds.

Dec. 31 Accrued interest at year-end on the Lesley bonds.

(Assume that all intervening transactions and adjustments have been properly recorded and the number of bonds owned has not changed from December 31, 2006, to December 31, 2008.)

2009 Jan. 1 Received the semiannual interest on the Lesley bonds.

Jan. 1 Sold $400,000 of Lesley bonds at 1 14. The broker deducted $7,000 for commissions and fees on the sale.

July 1 Received the semiannual interest on the Lesley bonds.

Dec. 31 Accrued interest at year-end on the Lesley bonds.

Instructions

(a) Journalize the listed transactions for the years 2006 and 2009.

(b) Assume that the fair value of the bonds at December 31, 2006, was $770,000. 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 balance sheet presentation of the bonds and interest receivable at December 31, 2006. Assume the investments are considered longterm.

Indicate where any unrealized gain or loss is reported in the financial statements.