Question
In: Accounting
Problem 15-2A Recording, adjusting, and reporting available-for-sale debt securities LO P3 [The following information applies to...
Problem 15-2A Recording, adjusting, and reporting available-for-sale debt securities LO P3
[The following information applies to the questions
displayed below.]
Mead Inc. 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
| Jan. | 20 | Purchased Johnson & Johnson bonds for $23,000. | ||
| Feb. | 9 | Purchased notes of Sony for $57,690. | ||
| June | 12 | Purchased bonds of Mattel for $43,000. | ||
| Dec. | 31 | Fair values for debt in the portfolio are Johnson & Johnson, $26,500; Sony, $47,850; and Mattel, $53,050. |
Year 2
| Apr. | 15 | Sold all of the bonds of Johnson & Johnson for $26,000. | ||
| July | 5 | Sold all of the bonds of Mattel for $37,600. | ||
| July | 22 | Purchased notes of Sara Lee for $14,500. | ||
| Aug. | 19 | Purchased bonds of Kodak for $17,050. | ||
| Dec. | 31 | Fair values for debt in the portfolio are Kodak, $18,200; Sara Lee, $14,500; and Sony, $61,000. |
Year 3
| Feb. | 27 | Purchased bonds of Microsoft for $159,800. | ||
| June | 21 | Sold all of the notes of Sony for $59,600. | ||
| June | 30 | Purchased bonds of Black & Decker for $52,900. | ||
| Aug. | 3 | Sold all of the notes of Sara Lee for $12,000. | ||
| Nov. | 1 | Sold all of the bonds of Kodak for $22,100. | ||
| Dec. | 31 | Fair values for debt in the portfolio are Black & Decker, $56,100; and Microsoft, $159,100. |
Problem 15-2A 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.)
Solutions
Expert Solution
Below is the answer
| Year 1 | Account titles | Debit | Credit |
| Jan.20 | Long-Term Investments—AFS (J&J) | 23,000 | |
| Cash | 23,000 | ||
| Purchased Johnson & Johnson shares | |||
| Feb.9 | Long-Term Investments—AFS (Sony). | 57,690 | |
| Cash | 57,690 | ||
| Purchased Sony shares | |||
| June.12 | Long-Term Investments—AFS (Mattel) | 43,000 | |
| Cash | 43,000 | ||
| Purchased Mattel shares | |||
| Dec.31 | Market Adjustment—AFS (LT) | 3,710 | |
| Unrealized Gain - Equity | 3,710 |
| Annual adjustment to market values | Cost | Fair Value | Difference |
| J & J | 23,000 | 26,500 | 3,500 |
| Sony | 57,690 | 47,850 | -9,840 |
| Mattel | 43,000 | 53,050 | 10,050 |
| Total | 1,23,690 | 1,27,400 | 3,710 |
| Year 2 | Account titles | Debit | Credit |
| Apr.15 | Cash | 26,000 | |
| Gain on Sale of Investments | 3,000 | ||
| Long-Term Investments—AFS (J&J) | 23,000 | ||
| Sold Johnson & Johnson shares | |||
| Jul.5 | Cash | 37,600 | |
| Loss on Sale of Investments | 5,400 | ||
| Long-Term Investments—AFS (Mattel) | 43,000 | ||
| Sold Mattel shares | |||
| Jul.22 | Long-Term Investments—AFS (Sara Lee) | 14,500 | |
| Cash | 14,500 | ||
| Purchased Sara Lee shares | |||
| Aug.19 | Long-Term Investments—AFS (Kodak) | 17,050 | |
| Cash | 17,050 | ||
| Purchased Kodak shares | |||
| Dec. 31 | Market Adjustment—AFS (LT) | 750 | |
| Unrealized Gain - Equity | 750 |
| Annual adjustment to market values | Cost | Fair Value | Difference |
| Sony | 57,690 | 61,000 | 3,310 |
| Sara Lee | 14,500 | 14,500 | - |
| Kodak | 17,050 | 18,200 | 1,150 |
| Total | 89,240 | 93,700 | 4,460 |
| Fair Value Adjustment account: | Amount | ||
| Required balance | Debit Balance | 4,460 | |
| Unadjusted balance | Debit Balance | 3,710 | |
| Required change | Credit Balance | 750 |
| Year 3 | Account titles | Debit | Credit |
| Feb.27 | Long-Term Investments—AFS (Microsoft) | 1,59,800 | |
| Cash | 1,59,800 | ||
| Purchased Microsoft shares | |||
| June. 21 | Cash | 59,600 | |
| Gain on Sale of Investments | 1,910 | ||
| Long-Term Investments—AFS (Sony) | 57,690 | ||
| Sold Sony shares | |||
| jun. 30 | Long-Term Investments—AFS (Black & Decker) | 52,900 | |
| Cash | 52,900 | ||
| Purchased Black & Decker shares | |||
| Aug.3 | Cash | 12,000 | |
| Loss on Sale of Investments | 2,500 | ||
| Long-Term Investments—AFS (Sara Lee) | 14,500 | ||
| Sold Sara Lee shares | |||
| Nov.1 | Cash | 22,100 | |
| Gain on Sale of Investments | 5,050 | ||
| Long-Term Investments—AFS (Kodak) | 17,050 | ||
| Sold Kodak shares | |||
| Dec.31 | Unrealized Gain—Equity | 1,960 | |
| Market Adjustment—AFS (LT) | 1,960 |
| Annual adjustment to market values | Cost | Fair Value | Difference |
| Microsoft | 1,59,800 | 1,59,100 | -700 |
| Black & Decker | 52,900 | 56,100 | 3,200 |
| Total | 2,12,700 | 2,15,200 | 2,500 |
 ekkarill92 answered 2 years agoRelated SolutionsProblem 15-2A Recording, adjusting, and reporting available-for-sale debt securities LO P3 [The following information applies to...Problem 15-2A Recording, adjusting, and reporting
available-for-sale debt securities LO P3
[The following information applies to the questions
displayed below.]
Mead Inc. 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
Jan.
20
Purchased Johnson & Johnson bonds for $23,000.
Feb.
9
Purchased notes of Sony for $57,690.
June
12
Purchased bonds of Mattel for $43,000.
Dec.
31
Fair values for debt in the portfolio are...
Problem 15-2A Recording, adjusting, and reporting short-term available-for-sale securities LO P3 [The following information applies to...Problem 15-2A Recording, adjusting, and reporting short-term
available-for-sale securities LO P3
[The following information applies to the questions
displayed below.]
Rose Company had no short-term investments prior to year 2017. It
had the following transactions involving short-term investments in
available-for-sale securities during 2017.
3. Prepare an adjusting entry, if necessary, to
record the year-end fair value adjustment for the portfolio of
short-term investments in available-for-sale securities.
(If no entry is required for a transaction/event, select
"No journal entry required" in...
Problem 15-3A Recording, adjusting, and reporting long-term available-for-sale securities LO P3 [The following information applies to...Problem 15-3A Recording, adjusting, and reporting long-term
available-for-sale securities LO P3 [The following information
applies to the questions displayed below.] Grass Security, which
began operations in 2017, invests in long-term available-for-sale
securities. Following is a series of transactions and events
determining its long-term investment activity. 2017 Jan. 20
Purchased 1,500 shares of Johnson & Johnson at $21.00 per share
plus a $290 commission. Feb. 9 Purchased 1,700 shares of Sony at
$46.70 per share plus a $275 commission. June 12...
Required information Problem 15-3A Recording, adjusting, and reporting long-term available-for-sale securities LO P3 [The following information...Required information
Problem 15-3A Recording, adjusting, and reporting long-term
available-for-sale securities LO P3
[The following information applies to the questions
displayed below.]
Grass Security, which began operations in 2017, invests in
long-term available-for-sale securities. Following is a series of
transactions and events determining its long-term investment
activity.
2017
Jan.
20
Purchased 2,900 shares of Johnson
& Johnson at $22.40 per share plus a $430 commission.
Feb.
9
Purchased 3,100 shares of Sony at
$48.10 per share plus a $415 commission....
Problem 15-3A Debt investments in available-for-sale securities; unrealized and realized gains and losses LO P3 [The...Problem 15-3A Debt investments in available-for-sale securities;
unrealized and realized gains and losses LO P3
[The following information applies to the questions
displayed below.]
Stoll Co.'s long-term available-for-sale portfolio at the
start of this year consists of the following.
Available-for-Sale Securities
Cost
Fair Value
Company A bonds
$
533,600
$
490,000
Company B notes
159,230
152,000
Company C bonds
662,000
640,190
Stoll enters into the following transactions involving its
available-for-sale debt securities this year.
Jan.
29
Sold one-half of the...
Problem 7-2A Estimating and reporting bad debts LO P2, P3 [The following information applies to the...Problem 7-2A Estimating and reporting bad debts LO P2, P3
[The following information applies to the questions
displayed below.]
At December 31, 2017, Hawke Company reports the following results
for its calendar year.
Cash sales
$
2,185,820
Credit sales
3,998,000
In addition, its unadjusted trial balance includes the following
items.
Accounts receivable
$
1,211,394
debit
Allowance for doubtful accounts
25,160
debit
. Prepare the adjusting entry for this company
to recognize bad debts under each of the following independent
assumptions....
Required information Problem 9-2A Estimating and reporting bad debts LO P2, P3 [The following information applies...Required information
Problem 9-2A Estimating and reporting bad debts LO P2, P3
[The following information applies to the questions
displayed below.]
At December 31, Hawke Company reports the following results for its
calendar year.
Cash sales
$
1,777,560
Credit sales
$
2,989,000
In addition, its unadjusted trial balance includes the following
items.
Accounts receivable
$
905,667
debit
Allowance for doubtful accounts
$
11,710
debit
Problem 9-2A Part 1
Required:
1. Prepare the adjusting entry to record bad debts
under each...
Required information Problem 7-2A Estimating and reporting bad debts LO P2, P3 [The following information applies...Required information
Problem 7-2A Estimating and reporting bad debts LO P2, P3
[The following information applies to the questions
displayed below.]
At December 31, Hawke Company reports the following results for its
calendar year.
Cash sales
$
2,197,110
Credit sales
$
2,971,000
In addition, its unadjusted trial balance includes the following
items.
Accounts receivable
$
900,213
debit
Allowance for doubtful accounts
$
11,130
debit
Problem 7-2A Part 1
Required:
1. Prepare the adjusting entry to record bad debts
under each...
Problem 15-4A Recording, adjusting, and reporting stock investments with insignificant influence LO P4 [The following information...Problem 15-4A Recording, adjusting, and reporting stock
investments with insignificant influence LO P4
[The following information applies to the questions
displayed below.]
Rose Company had no short-term investments prior to this year. It
had the following transactions this year involving short-term stock
investments with insignificant influence.
Apr.
16
Purchased 8,000 shares of Gem Co. stock at $24.50 per
share.
July
7
Purchased 4,000 shares of PepsiCo stock at $54.00 per
share.
20
Purchased 2,000 shares of Xerox stock at $17.00...
Problem 15-4A Recording, adjusting, and reporting stock investments with insignificant influence LO P4 [The following information...Problem 15-4A Recording, adjusting, and reporting stock
investments with insignificant influence LO P4
[The following information applies to the questions
displayed below.]
Rose Company had no short-term investments prior to this year. It
had the following transactions this year involving short-term stock
investments with insignificant influence.
Apr.
16
Purchased 8,000 shares of Gem Co. stock at $24.50 per
share.
July
7
Purchased 4,000 shares of PepsiCo stock at $54.00 per
share.
20
Purchased 2,000 shares of Xerox stock at $17.00...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
ADVERTISEMENT
|