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 $40 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 $2.4 million from the Convenience, Inc., bonds.
Dec.		1		Purchased 15% bonds of Facsimile Enterprises at their $32 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 $9.3 million.
		31		Recorded any necessary adjusting entry(s) relating to the investments. The fair values of the investments at December 31 were: Convenience bonds $ 36.7 million Facsimile Enterprises bonds 32.9 million U.S. Treasury bills 9.3 million A. Record the interest accrued on Convenience, Inc. bonds. B. Record the interest accrued on Facsimile Enterprises bonds. C. Prepare any journal entry needed to adjust the investments for fair value.

Answer 1

$ in Million	$ in Million
			Debit	Credit
1	Nov-01	Cash	$ 2.4
		Interest Revenue/Interest on Bonds	$ 2.4
		(to record receipt of intrest)
2	Dec.01	Investment in Facsimile Enterprise Bonds	$ 32
		Cash		$ 32
		(to record purchase of investment in bonds)
3	Dec-31	Investment in US Treasury bills	9.3
		Cash		9.3
		(to record purchase of us treasury bill)
4	Dec-31	Interest Accrued/Receivable (Convenience Inc. bond)	0.80
		Interest Revenue/Interest on Bonds	0.80
		($40 million*12%*2/12)
5	Dec-31	Interest Accrued/Receivable (Facsimile Enterprise Bonds)	0.40
		Interest Revenue/Interest on Bonds	0.40
		($32 million*15%*1/12)
6	Dec-31	Change in Fair Value	2.40
		Investment in Facsimile Enterprise Bonds (32.9-32)	0.90
		Investment in Convenience Inc. bond (40-36.7)	3.30
		OR
		Change in Fair Value	3.30
		Investment in Convenience Inc. bond	3.30
		Investment in Facsimile Enterprise Bonds	0.90
		Change in Fair Value		0.90