Required information Problem 15-2A (Algo) Recording, adjusting, and reporting available-for-sale debt securities LO P3 [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 $27,000. February 9 Purchased Sony notes for $61,290. June 12 Purchased Mattel bonds for $47,000. December 31 Fair values for debt in the portfolio are Johnson & Johnson, $31,300; Sony, $50, 250; and Mattel, $56,050. Year 2 April 15 Sold all of the Johnson & Johnson bonds for $30,000. July 5 Sold all of the Mattel bonds for $40,400. July 22 Purchased Sara Lee notes for $16,700. August 19 Purchased Kodak bonds for $19,850. December 31 Fair values for debt in the portfolio are Kodak, $19,600; Sara Lee, $18,500; and Sony, $ 64,000. Year 3 February 27 Purchased Microsoft bonds for $159,200. June 21 Sold all of the Sony notes for $62,800. June 30 Purchased Black & Decker bonds for $56,900. August 3 Sold all of the Sara Lee notes for $15,600. November i Sold all of the Kodak bonds for $24,700. December 31 Fair values for debt in the portfolio are Black & Decker, $58,500; and Microsoft, $159,900. Problem 15-2A (Algo) Part 1 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. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Year 1 Year 2 Year 3 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. No Date General Journal Debit Credit 1 January 20 Debt investments - AFS 27,000 Cash 27,000 2 February 09 Debt investments - AFS 61,290 Cash 61,290 3 June 12 Debt investments - AFS 47,000 Cash 47,000 4 December 31 2,310 Fair value adjustment - AFS Unrealized gain - Equity 2,310 X Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Year 1 Year 2 Year 3 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. No Date General Journal Debit Credit 1 April 15 Cash 30,000 Gain on sale of debt investments 3,000 27,000 Debt investments - AFS 2 July 05 Cash 40,400 6,600 Loss on sale of debt investments OOO Debt investments - AFS 47,000 3 July 22 Debt investments - AFS 16,700 Cash 16,700 4 August 19 Debt investments - AFS 19,850 Cash 19,850 5 December 31 4,260 Fair value adjustment - AFS Unrealized gain - Equity 4,260 X 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. No Date General Journal Debit Credit 1 February 27 Debt investments - AFS 159,200 Cash 159,200 2 June 21 Cash 62,800 Gain on sale of debt investments 1,510 61,290 Debt investments - AFS 3 June 30 Debt investments - AFS 56,900 Cash 56,900 4 August 03 Cash 15,600 Loss on sale of debt investments 1,100 Debt investments - AFS 16,700 5 November 01 Cash 24,700 Gain on sale of debt investments 4,850 Debt investments - AFS 19,850 6 December 31 6,920 X Fair value adjustment - AFS Unrealized gain - Equity 6,920 X Problem 15-2A (Algo) Part 3 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.) Year 1 Year 2 Year 3 Realized gains (losses) $ 0 $ 3,000 Sale of Johnson & Johnson Sale of Mattel 0 0 Sale of Sony 0 Sale of Sara Lee 0 0 Sale of Kodak Total realized gains (losses) Unrealized gains (losses) at year-end $ 0 $ 3,000 $ 0