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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 $26,000.
Feb.		9		Purchased notes of Sony for $60,390.
June		12		Purchased bonds of Mattel for $46,000.
Dec.		31		Fair values for debt in the portfolio are Johnson & Johnson, $30,100; Sony, $49,650; and Mattel, $54,850.

Year 2

Apr.		15		Sold all of the bonds of Johnson & Johnson for $29,000.
July		5		Sold all of the bonds of Mattel for $39,700.
July		22		Purchased notes of Sara Lee for $15,900.
Aug.		19		Purchased bonds of Kodak for $19,150.
Dec.		31		Fair values for debt in the portfolio are Kodak, $19,250; Sara Lee, $17,500; and Sony, $62,000.

Year 3

Feb.		27		Purchased bonds of Microsoft for $159,600.
June		21		Sold all of the notes of Sony for $62,000.
June		30		Purchased bonds of Black & Decker for $55,900.
Aug.		3		Sold all of the notes of Sara Lee for $14,700.
Nov.		1		Sold all of the bonds of Kodak for $24,050.
Dec.		31		Fair values for debt in the portfolio are Black & Decker, $57,900; and Microsoft, $159,700.

2. Complete the following table that summarizes the (a) total cost, (b) total fair value adjustment, and (c) total fair value of the portfolio of long-term available-for-sale debt securities at each year-end. (Loss amounts should be indicated with a minus sign.)

Answer 1

Year 1		Cost	Fair Value	Gain/(Loss)
	Johnson	26000	30100	4100
	Sony	60390	49650	-10740
	Mattel	46000	54850	8850
	Total	132390	134600	2210

Year 2		Cost	Fair value	Gain/(Loss)
	Kodak	19150	19250	100
	Sara lee	15900	17500	1600
	Sony	60390	62000	1610
	Total	95440	98750	3310
	Fair Value Adjustment account:
	Required balance	3310	dr.
	Unadjusted balance	2210	dr.
	Required change	1100	dr.

Year 3		Cost	Fair market	Gain/(loss)
	Black & Decker	55900	57900	2000
	Microsoft	159600	159700	100
	Total	215500	217600	2100
	Fair Value Adjustment account:
	Required balance .	2100	cr.
	Unadjusted balance	3310	dr.
	Required change	1210	dr.