FF&T; Corporation is a confectionery wholesaler that frequently boys and sells s

Question

FF&T; Corporation is a confectionery wholesaler that frequently boys 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 2016. At November 1. FF&T; held S65 million of 25-ycar. 12% bonds of Convenience. Inc.. purchased May 1. 2016. 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 $3.9 million from the Convenience. Inc., bonds. Dec. 1 Purchased 16% bonds of Facsimile Entireness at their $60 million face value, to be held until they mature in 2026. Semiannual interest is payable May 31 and November 30. 31 Purchased U.S. Treasury bills that mature in two months for $9.8 million. 31 Recorded any necessary adjusting entry(s) relating to the investments. The fair values of the investments at December 31 were: Required: Prepare the appropriate journal entry for each transaction or event.

Explanation / Answer

Journal Entries Debit Credit Mio $ Mio $ Nov 1 Bank A/c 3.9 To Interest Income 3.9 Dec 1 Investment in 16% Bond 60 TO Bank 60 Dec 31 US Treasury Bills 9.8 TO Bank 9.8 Dec 31 Unrealised Loss 3.3 To Investment in convincing Bond 3.3 (65-61.7) Dec 31 Investment in 16% Bond 0.9 To Unrealised Gain 0.9 (60.9-60) Dec 31 No entry for treasury bills

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