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) 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.

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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 $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) 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.

Journal entry worksheet
1
2
3
Date
December 31
Note: Enter debits before credits.
4
Fair values for debt in the portfolio are: Kodak, $22,125; Sara Lee, $20,000;
and Sony, $64,000.
5
General Journal
Fair value adjustment - AFS
Unrealized gain - Equity
Debit Credit

Journal entry worksheet
1
2
3
Date
February 27
Note: Enter debits before credits.
4
Purchased Microsoft bonds for $159,600.
5
6
General Journal
Debit
Credit

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Year 2 and 3 for Fair Value at the end of the year are still incorrect and I do not understand why?

No
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
3
4
Year 1
5
6
Year 2
Date
February 27
June 21
June 30
August 03
November 01
Year 3
December 31
Debt investments - AFS
Cash
Cash
Gain on sale of debt investments
Debt investments - AFS
Cash
General Journal
Cash
Loss on sale of debt investments
Debt investments - AFS
Cash
Gain on sale of debt investments
Debt investments - AFS
Fair value adjustment - AFS
Unrealized gain - Equity
X
Debit
159,600
64,000
58,400
16,950
2,950
25,675
1,600
Credit
159,600
1,360
62,640
58,400
19,900
4,775
20,900
1,600 X

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