Question

FF&T Corporation is a confectionery wholesaler that frequently buys and sells securities to meet various investment objectives. The following selected transactions relate to FF&T’s investment activities during the last two months of 2021. At November 1, FF&T held $45 million of 20-year, 12% bonds of Convenience, Inc., purchased May 1, 2021, at face value. Management has the positive intent and ability to hold the bonds until maturity. FF&T’s fiscal year ends on December 31.

Nov.		1		Received semiannual interest of $2.7 million from the Convenience, Inc., bonds.
Dec.		1		Purchased 16% bonds of Facsimile Enterprises at their $30 million face value, to be held until they mature in 2024. Semiannual interest is payable May 31 and November 30.
		31		Purchased U.S. Treasury bills to be held until they mature in two months for $10.3 million.
		31		Recorded any necessary adjusting entry(s) relating to the investments.

  
The fair values of the investments at December 31 were:

Convenience bonds	$	42.3	million
Facsimile Enterprises bonds		30.7	million
U.S. Treasury bills		10.3	million

  
Required:
Prepare the appropriate journal entry for each transaction or event. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)

1. Received semiannual interest of $2.7 million from the Convenience, Inc., bonds

2.Purchased 16% bonds of Facsimile Enterprises at their $30 million face value, to be held until they mature in 2024. Semiannual interest is payable May 31 and November 30

3. Purchased U.S. Treasury bills to be held until they mature in two months for $10.3 million.

4. Record the interest accrued on Convenience, Inc. bonds

5. Record the interest accrued on Facsimile Enterprises bonds.

6. Record the fair value adjustment.

	Date General Journal Debit Credit Dec 31

Answer 1

No.	Date	General Journal	Debit	Credit
1	Nov. 1	Cash	2.7
		Interest revenue		2.7
		(To record semiannual interest received)
2	Dec. 1	Investment in Facsimile Enterprise bonds	30.0
		Cash		30.0
		(To record purchase of investment)
3	Dec. 31	Investment in U.S. Treasury bills	10.3
		Cash		10.3
		(To record purchase of treasury bills)
4	Dec. 31	Interest receivable ($45 x 12% x 2/12)	0.9
		Interest revenue		0.9
		(To record interest accrued on Convenience Inc. bonds)
5	Dec. 31	Interest receivable ($30 x 16% x 1/12)	0.4
		Interest revenue		0.4
		(To record interest accrued on Facsimile Enterprises bonds)
6	Dec. 31	No journal entry required

Note: Held-to-maturity investments are valued at their amortized cost and not at fair values. Hence, no journal entry is required for fair value adjustment.