Equity Securities Entries Capriati Corporation made the following cash purchases
ID: 2376338 • Letter: E
Question
Equity Securities Entries Capriati Corporation made the following cash purchases of securities during 2010, which is the first year in which Capriati invested in securities.1. On January 15, purchased 9,000 shares of Gonzalez Company’s common stock at $33.50 per share plus commission $1,980.
2. On April 1, purchased 5,000 shares of Belmont Co.’s common stock at $52.00 per share plus commission $3,370.
3. On September 10, purchased 7,000 shares of Thep Co.’s preferred stock at $26.50 per share plus commission $4,910.
On May 20, 2010, Capriati sold 3,000 shares of Gonzalez Company’s common stock at a market price of $35 per share less brokerage commissions, taxes, and fees of $2,850. The year-end fair values per share were: Gonzalez $30, Belmont $55 and Thep $28. In addition, the chief accountant of Capriati told you that Capriati Corporation plans to hold these securities for the long term but may sell them in order to earn profits from appreciation in prices.
(a) Prepare the journal entries to record the above three security purchases.
(b) Prepare the journal entry for the security sale on May 20.
(c) Compute the unrealized gains or losses and prepare the adjusting entries for Capriati on December 31, 2010.
1. On January 15, purchased 9,000 shares of Gonzalez Company’s common stock at $33.50 per share plus commission $1,980.
2. On April 1, purchased 5,000 shares of Belmont Co.’s common stock at $52.00 per share plus commission $3,370.
3. On September 10, purchased 7,000 shares of Thep Co.’s preferred stock at $26.50 per share plus commission $4,910.
On May 20, 2010, Capriati sold 3,000 shares of Gonzalez Company’s common stock at a market price of $35 per share less brokerage commissions, taxes, and fees of $2,850. The year-end fair values per share were: Gonzalez $30, Belmont $55 and Thep $28. In addition, the chief accountant of Capriati told you that Capriati Corporation plans to hold these securities for the long term but may sell them in order to earn profits from appreciation in prices.
(a) Prepare the journal entries to record the above three security purchases.
(b) Prepare the journal entry for the security sale on May 20.
(c) Compute the unrealized gains or losses and prepare the adjusting entries for Capriati on December 31, 2010.
Explanation / Answer
(a) journal entries to record the above three security purchases Jan. 15 Trading Securities [(9000shares×$33.50) + $1980] Dr $303,480 Cash Cr $303,480 Purchased 9,000 shares of Gonzalez Company's common stock at $33.50 per share plus commission $1,980. Apr 1 Trading Securities [(5000shares×$52) + $3370] Dr $263,370 Cash Cr $ 263,370 Purchased 5,000 shares of Belmont Co.'s common stock at $52.00 per share plus commission $3,370. Sep 10 Trading Securities [(7000shares×$26.50) + $4910] Dr $190,410 Cash Cr $ 190,410 Purchased 7,000 shares of Thep Co.'s preferred stock at $26.50 per share plus commission $4,910. (b) journal entry for the security sale on May 20. May 20 Cash (3000*35-2850) Dr $102,150 Trading Securities (3000*$303480/9000) Cr $101,160 Gain on Sale of Trading Securities Cr 990 Sale of 3000 share of Gonzalez Company (c) prepare the adjusting entries & Compute the unrealized gains or losses 31 Dec'10 Trading Securities Dr 11630 Unrealized Gain on Investments Cr 11630 To record a increase in the value of 5,000 shares of Belmont (55 - 263370/5000)*5000 = 11630 31 Dec'10 Trading Securities Dr 5590 Unrealized Gain on Investments Cr 5590 To record a increase in the value of 7,000 shares of Thep (28-190410/7000)*7000=5590 31 Dec'10 Unrealized Loss on Investments Dr 23,320 Trading Securities Cr 23,320 To record a decrease in the value of 6,000 shares of Gonzales =6000*[30 - ((303480-101160)/6000)] = -23320
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