Construction Forms Corporation buys securities to be available for sale when cir
ID: 2417852 • Letter: C
Question
Construction Forms Corporation buys securities to be available for sale when circumstances warrant, not to profit from short-term differences in price and not necessarily to hold debt securities to maturity. The following selected transactions relate to investment activities of Construction Forms whose fiscal year ends on December 31. No investments were held by Construction Forms at the beginning of the year.
Purchased 1 million Platinum Gauges, Inc., common shares for $32 million, including brokerage fees and commissions.
Received cash dividends of $4 million on the investment in Platinum Gauges, Inc., common shares.
Purchased 500,000 LTD International preferred shares for $50 million, including brokerage fees and commissions.
Recorded the necessary adjusting entry(s) relating to the investments. The market prices of the investments are $34 per share for Platinum Gauges, Inc., and $94 per share for LTD International preferred shares.
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).)
1.
Purchased 1 million Platinum Gauges, Inc., common shares for $32 million, including brokerage fees and commissions.
2.
Purchased $24 million of 10% bonds at face value from Zenith Wholesale Corporation.
3.
Received cash dividends of $4 million on the investment in Platinum Gauges, Inc., common shares.
4.
Received semiannual interest of $1.00 million on the investment in Zenith bonds.
5.
Sold the Zenith bonds for $29 million.
6.
Purchased 500,000 LTD International preferred shares for $50 million, including brokerage fees and commissions.
7.
Record the fair value adjustment.
8.
Sold half the Platinum Gauges, Inc., shares for $34 per share.
9.
Sold the LTD International preferred shares for $96 per share.
Construction Forms Corporation buys securities to be available for sale when circumstances warrant, not to profit from short-term differences in price and not necessarily to hold debt securities to maturity. The following selected transactions relate to investment activities of Construction Forms whose fiscal year ends on December 31. No investments were held by Construction Forms at the beginning of the year.
Explanation / Answer
Journal entries
2017
Date Description Debit Credit Marc 2 Avaialable for sale securities -Platinum $32m To cash $32m April 12 Avaialble for sale securities - bonds $24m To Cash $24m July 18 Cash $4m To Dividend income $4m Oct 16 Cash $1m To interest income $1m Oct 16 CAsh $29m To Avaialble for sale securities $24m To Gain on sale 5m Nov 1 Available for sale securities - LTD $50m To Cash $50m Dec 31 Availabel for sale secutires - plantinum $2m unrealsied holding gain or loss 1m To Available for sale securities - LTD $3mRelated Questions
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