Current Assets Cash $1,054.312

Accounts Receivable 123,200

Short-term Investments 738,054

Inventories 578,366

Prepaid Expenses 82,310

Total Current Assets $2,576,242

Property, plant and equip (net) 832,400

Intangibles and other assets 692,175

Total Assets $4,100,817

Current Liabilities Accounts payable 69,210

Short-term notes 131,870

Other current liabilities 200,574

Total Current Liabilities $401,654

Long-term debt 1,962,357

Total Liabilities $2,364,011

Stockholders Equity Common Stock 1,421,300

Retained Earnings 315,506

Total Stockholders Equity $1,736,806

Total liabilities + Stockholders $4,100,817

1. The company acquired as a long-term investment $1 million of 6% bonds, on March 1, 2021. Company management has the positive intent and ability to hold the bonds until they mature in 5 years on March 1, 2026. The market interest rate was 8% for the bonds and the company paid $918,891.04 for the bonds. The company will receive interest semiannually on August 31st and February 28th. As a result of changing market conditions, the fair value of the bonds at December 31, 2021 was $1,050,000.

Required:

a. Prepare the journal entry to record the investment in the bonds on March 1, 2021

b. Prepare the journal entry to record the interest payment received on August 31, 2021 using the effective (market) interest method

c. Prepare the adjusting entry (if necessary) for the change in fair value of the bond at December 31, 2021

2. Reeves Incorporated buys and sells securities expecting to earn profits on short-term differences in price. They had the following transactions during 2021:

April 1 Purchased 100,000 shares of Apple stock for $1,600,000

June 1 Received cash dividend of $20,000 from Apple

Dec 31 The stock price of the Apple was $19.50 per share on December 31st .

Required: Record the April 1st and June 1st transactions. Make any necessary adjusting entry at the end of the fiscal year December 31, 2021 due to the change in stock price

3. Reeves Incorporated pays employees monthly. Payroll information is listed below for August 2021.

Salaries $600,000

Federal income taxes to be withheld $125,000

Federal unemployment tax rate .60%

State unemployment tax rate 5.4%

Social Security tax rate 6.2%

Medicare tax rate 1.45%

Required: Prepare the appropriate journal entries to record salaries and wages expense and payroll tax expense for the August 2021 pay period.