P13-1B Marshall Farms is a grower of hybrid seed corn for DeKalb Genetics Corporation. It

Price: $2.50


Marshall Farms is a grower of hybrid seed corn for DeKalb Genetics Corporation. It
has had two exceptionally good years and has elected to invest its excess funds in bonds. The
selected transactions relate to bonds acquired as an investment by Marshall Farms,
whose fiscal year ends on December 31.

2008
Jan. 1 Purchased at par $600,000 of Kenner Corporation 10-year, 9% bonds dated January 1,
2008, directly from the issuing corporation.
July 1 Received the semiannual interest on the Kenner bonds.
Dec. 31 Accrual of interest at year-end on the Kenner bonds.
(Assume that all intervening transactions and adjustments have been properly recorded and the
number of bonds owned has not changed from December 31, 2008, to December 31, 2010.)

2011
Jan. 1 Received the semiannual interest on the Kenner bonds.
Jan. 1 Sold $300,000 Kenner bonds at 114.The broker deducted $7,000 for commissions and
fees on the sale.
July 1 Received the semiannual interest on the Kenner bonds.
Dec. 31 Accrual of interest at year-end on the Kenner bonds.

Instructions
(a) Journalize the listed transactions for the years 2008 and 2011.
(b) Assume that the fair value of the bonds at December 31, 2008, was $580,000.These bonds are
classified as available-for-sale securities. Prepare the adjusting entry to record these bonds at
fair value.
(c) Based on your analysis in part (b) show the balance sheet presentation of the bonds and interest
receivable at December 31, 2008. Assume the investments are considered long-term.
Indicate where any unrealized gain or loss is reported in the financial statements.