Rose Company had no short-term investments prior to year 2015. It had the follow
ID: 2416803 • Letter: R
Question
Rose Company had no short-term investments prior to year 2015. It had the following transactions involving short-term investments in available-for-sale securities during 2015.
Apr. 16: Purchased 8,000 shares of Gem Co. stock at $27.75 per share plus a $400 brokerage fee.
May 1: Paid $180,000 to buy 13-week U.S. Treasury bills (debt securities): $180,000 principal amount, 5% interest, securities dated May 1.
July 7: Purchased 4,000 shares of PepsiCo stock at $53.00 per share plus a $370 brokerage fee.
July 20: Purchased 2,000 shares of Xerox stock at $18.00 per share plus a $450 brokerage fee.
Aug. 3: Received a check for principal and accrued interest on the U.S. Treasury bills that matured on July 31.
Aug. 15: Received a(n) $1.00 per share cash dividend on the Gem Co. stock.
Aug. 28: Sold 4,000 shares of Gem Co. stock at $34.50 per share less a $490 brokerage fee.
Oct. 1: Received a $1.80 per share cash dividend on the PepsiCo shares.
Dec. 15: Received a $1.15 per share cash dividend on the remaining Gem Co. shares.
Dec. 31: Received a $1.30 per share cash dividend on the PepsiCo shares.
1. Prepare journal entries to record the preceding transactions and events. (If no entry is required select No journal entry required in the first entry field. Do not round your intermediate calculations.)
2. Prepare a table to compare the year-end cost and fair values of Rose's short-term investments in available-for-sale securities. The year-end fair values per share are: Gem Co., $30.00; PepsiCo, $50.25; and Xerox, $15.00.
3. Prepare an adjusting entry, if necessary, to record the year-end fair value adjustment for the portfolio of short-term investments in available-for-sale securities. (If no entry is required select No journal entry required in the first entry field)
Explanation / Answer
Apr. 16 short-term investments $ 222,400 Cash $ 222,400 1-May short-term investments $ 180,000 Cash $ 180,000 7-Jul short-term investments $ 212,370 Cash $ 212,370 20-Jul short-term investments $ 36,450 Cash $ 16,955 Aug. 3 Cash $ 182,250 Short Term Investments $ 180,000 Interest Revenue $ 2,250 15 Cash $ 8,000 Dividend Revenue $ 8,000 28 Cash $ 137,510 Short Term Investments $ 111,200 Gain on sale of short term investments $ 26,310 Oct. 1 Cash $ 7,200 Dividend Revenue $ 7,200 Dec. 15 Cash $ 4,600 Dividend Revenue $ 4,600 31 Cash $ 5,200 Dividend Revenue $ 5,200 Particulares Cost Fair Value No of share held Difference Loss/Gain Gem Co $ 27.80 $ 30.00 4000 $ 2.20 $ 8,800.00 PepsiCo $ 53.09 $ 50.25 4000 $ (2.84) $ (11,370.00) Xerox $ 18.23 $ 15.00 2000 $ (3.23) $ (6,450.00) Gain On fair value valuation $ (9,020.00) Adjustment entries Debit Credit Unrealized Holding Gain/loss $ (9,020.00) Securities Fair Value Adjustment $ (9,020.00)
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