15-2A Recording, adjusting, and reporting available-for-sale debt securities LO P3 [The following information applies to the questions displayed below.] Mead Inc. 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 Jan. 20 Purchased Johnson & Johnson bonds for $23,500. Feb. 9 Purchased notes of Sony for $58,140. June 12 Purchased bonds of Mattel for $43,500. Dec. 31 Fair values for debt in the portfolio are Johnson & Johnson, $26,100; Sony, $48,150; and Mattel, $54,150. Year 2 Apr. 15 Sold all of the bonds of Johnson & Johnson for $26,500. July 5 Sold all of the bonds of Mattel for $37,950. July 22 Purchased notes of Sara Lee for $14,900. Aug. 19 Purchased bonds of Kodak for $17,400. Dec. 31 Fair values for debt in the portfolio are Kodak, $18,375; Sara Lee, $15,000; and Sony, $61,000. Year 3 Feb. 27 Purchased bonds of Microsoft for $159,600. June 21 Sold all of the notes of Sony for $60,000. June 30 Purchased bonds of Black & Decker for $53,400. Aug. 3 Sold all of the notes of Sara Lee for $12,450. Nov. 1 Sold all of the bonds of Kodak for $22,425. Dec. 31 Fair values for debt in the portfolio are Black & Decker, $56,400; and Microsoft, $159,200. Year 1 Year 2 Year 31 Prepare journal entries to record these transactions and the year-end fair value adjustments to the portfolio of lon sale debt securities. View transaction list View journal entry worksheet No Date General Journal 1 20 Debt investments-AFS Cash 2 Feb 09 Debt investments-AFS Cash 3 Jun 12 Debt investments-AFS Cash 4 Dec 31 Fair value adjustment-AFS Unrealized gain-Equity Year 1 Year 2 > Debit Credit 23,500 23,500 58,140 58,140 43,500 43,500 3,260 3,260 Year 1 Year 2 Year 3 Prepare journal entries to record these transactions and the year-end fair value adjustments to the portfolio of lon sale debt securities. View transaction list View journal entry worksheet No Date General Journal 1 Apr 15 Cash Gain on sale of stock investments Debt investments-AFS 2 Jul 05 Cash Loss on sale of stock investments Debit Credit Debt investments - AFS 3 Jul 22 Debt investments-AFS Cash 14,900 14,900) 4 Aug 19 Debt investments-AFS 17,400 Cash 17,400 i 5 Dec 31 Fair value adjustment-AFS 24,125 Unrealized gain - Equity 24,125 View transaction list View journal entry worksheet No Date General Journal Debit Credit 1 Feb 27 Debt investments-AFS 159,600 Cash 159,600 2 Jun 21 Cash Gain on sale of stock investments Debt investments - AFS 3 Jun 30 Debt investments-AFS Cash 4 Aug 03 Cash Loss on sale of stock investments Debt investments-AFS 5 Nov 01 Cash 9 Dec 31 Gain on sale of stock investments Debt investments - AFS Fair value adjustment - AFS Unrealized gain-Equity 53,400 53,400 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. (Loss amounts should be indicated with a minus sign.) Debt Investments Long-Term AFS Securities (cost) Fair value adjustment-AFS 12/31/Yr. 1 12/31/Yr. 2 12/31/Yr. 3 Long-Term AFS Securities (Fair value) 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. (Losses should be indicated by a minus sign.) Realized gains (losses) Sale of Johnson & Johnson Sale of Mattel Sale of Sony Sale of Sara Lee Sale of Kodak Total realized gains (losses) Unrealized gains (losses) at year-end Year 1 Year 2 Year 3 +