Problem 15-2A (Algo) Recording, adjusting, and reporting available-for-sale debt securities LO P3

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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 $21,000.
February 9	Purchased Sony notes for $55,890.
June 12	Purchased Mattel bonds for $41,000.
December 31	Fair values for debt in the portfolio are Johnson & Johnson, $22,100; Sony, $46,650 and Mattel, $52,950.

Year 2

April 15	Sold all of the Johnson & Johnson bonds for $24,000.
July 5	Sold all of the Mattel bonds for $36,200.
July 22	Purchased Sara Lee notes for $13,900.
August 19	Purchased Kodak bonds for $15,650.
December 31	Fair values for debt in the portfolio are Kodak, $17,500 Sara Lee, $12,500 and Sony, $60,000.

Year 3

February 27	Purchased Microsoft bonds for $159,600.
June 21	Sold all of the Sony notes for $58,000.
June 30	Purchased Black & Decker bonds for $50,900.
August 3	Sold all of the Sara Lee notes for $10,200.
November 1	Sold all of the Kodak bonds for $20,800.
December 31	Fair values for debt in the portfolio are Black & Decker, $54,900 and Microsoft, $158,700.

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.)

\begin{tabular}{|l|l|l|l|} \hline \multicolumn{1}{|c|}{ Debt Investments } & \multicolumn{1}{c|}{12/31/ Year 1 } & 12/31/ Year 2 & \multicolumn{1}{c|}{12/31/ Year 3} \\ \hline Long-Term AFS Securities (cost) & & & \\ \hline Fair value adjustment-AFS & & & \\ \hline Long-Term AFS Securities (Fair value) & & & \\ \hline \end{tabular}