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Problem 15-2A (Algo) Recording, adjusting, and reporting available-for-sale debt securities LO P3 Skip to question [The following information applies to the questions displayed below.] Mead

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

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[The following information applies to the questions displayed below.]

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 $28,500.
February 9 Purchased Sony notes for $62,640.
June 12 Purchased Mattel bonds for $48,500.
December 31 Fair values for debt in the portfolio are Johnson & Johnson, $31,100; Sony, $53,150 and Mattel, $56,950.

Year 2

April 15 Sold all of the Johnson & Johnson bonds for $31,500.
July 5 Sold all of the Mattel bonds for $41,450.
July 22 Purchased Sara Lee notes for $19,900.
August 19 Purchased Kodak bonds for $20,900.
December 31 Fair values for debt in the portfolio are Kodak, $22,125 Sara Lee, $20,000 and Sony, $64,000.

Year 3

February 27 Purchased Microsoft bonds for $159,600.
June 21 Sold all of the Sony notes for $64,000.
June 30 Purchased Black & Decker bonds for $58,400.
August 3 Sold all of the Sara Lee notes for $16,950.
November 1 Sold all of the Kodak bonds for $25,675.
December 31 Fair values for debt in the portfolio are Black & Decker, $59,400 and Microsoft, $160,200.

Problem 15-2A (Algo)

Required:

1. Prepare journal entries to record these transactions and the year-end fair value adjustments to the portfolio of long-term available-for-sale debt securities.

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.

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

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