FF&T Corporation is a confectionery wholesaler that frequently buys and sells se

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 2016. At November 1, FF&T held $42 million of 25-year, 10% 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.

Purchased 12% bonds of Facsimile Enterprises at their $40 million face value, to be held until they mature in 2026. Semiannual interest is payable May 31 and November 30.

    Convenience bonds$38.7 million  

Facsimile Enterprises bonds 40.9 million  

U.S. Treasury bills 9.2 million

Prepare the appropriate journal entry for each transaction or event. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)

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 2016. At November 1, FF&T held $42 million of 25-year, 10% 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.

Explanation / Answer

FF &T corporation Journal Entries Date   Account Title Dr $ Cr $ Nov 1. Interest Income            2,100,000 Cash           2,100,000 Dec1. Investment in Bond -Facsimile Enterprises         40,000,000 Cash          40,000,000 Dec 31. Short Term Investment -US Treasury Bill           9,200,000 Cash            9,200,000 Dec 31. Interest Income                713,425 Accrued Interest Receivable               713,425 ( accrued interest for 61 days on Convenience Inc Bond) Interest Income                394,521 Accrued Interest Receivable               394,521 ( accrued interest for 30 days on Facsimile Bond) As bonds are held to maturity no fair value adjustments required on Dec 31.

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