Problem 15-2B Recording, adjusting, and reporting available-for-sale debt securities P3
Paris 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
Mar. 10 Purchased Apple bonds for $30,600.
Apr. 7 Purchased Ford notes for $56,250.
Sep. 1 Purchased Polaroid bonds for $28,200.
Dec. 31 Fair values for debt in the portfolio are Apple, $33,000; Ford, $54,600; and Polaroid, $29,400.
Year 2
Apr. 26 Sold all of the Ford notes for $51,250.
June 2 Purchased Duracell bonds for $34,650.
June 14 Purchased Sears notes for $25,200.
Nov. 27 Sold all of the Polaroid bonds for $30,600.
Dec. 31 Fair values for debt in the portfolio are Apple, $31,000; Duracell, $32,400; and Sears, $27,600.
Year 3
Jan. 28 Purchased Coca-Cola bonds for $40,000.
Aug. 22 Sold all of the Apple bonds for $25,800.
Sep. 3 Purchased Motorola notes for $84,000.
Oct. 9 Sold all of the Sears notes for $28,800.
Oct. 31 Sold all of the Duracell bonds for $27,000.
Dec. 31 Fair values for debt in the portfolio are Coca-Cola, $48,000, and Motorola, $82,000.
Required
Prepare journal entries to record these transactions and events and any year-end fair value adjustments to the portfolio of long-term available-for-sale debt securities.
Prepare a table that summarizes the (a) total cost, (b) total fair value adjustment, and (c) total fair value for the portfolio of long-term available-for-sale debt securities at each year-end.
Check (2b) Fair Value Adj. bal: 12/31/Year 1, $1,950 Dr.; 12/31/Year 2, $550 Dr.
Prepare a 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.
