P16-3A. On December 31, 2008, Ramey Associates owned the followingsecurities, he

Question

P16-3A. On December 31, 2008, Ramey Associates owned the followingsecurities, held as a long-term investment. The securities are notheld for influence or control of the investee.

Common Stock Shares Cost
Hurst Co. 2,000 $60,000
Pine Co. 5,000 45,000
Scott Co. 1,500 30,000





On December 31, 2008, the total fair value of the securities wasequal to its cost. In 2009, the following transactionsoccurred.

July 1 Received $1 per share semiannual cash dividend on Pine Co.common stock.
Aug. 1 Received $0.50 per share cash dividend on Hurst Co. commonstock.
Sept. 1 Sold 1,500 shares of Pine Co. common stock for cash at $8per share, less brokerage fees of $300.
Oct. 1 Sold 800 shares of Hurst Co. common stock for cash at $33per share, less brokerage fees of $500.
Nov. 1 Received $1 per share cash dividend on Scott Co. commonstock.
Dec. 15 Received $0.50 per share cash dividend on Hurst Co. commonstock.
31 Received $1 per share semiannual cash dividend on Pine Co.common stock.

At December 31, the fair values per share of the common stockswere: Hurst Co. $32, Pine Co. $8, and Scott Co. $18.

Instructions

a. Journalize the 2009 transactions and post to the account StockInvestments. (Use the T-account form.)

b. Prepare the adjusting entry at December 31, 2009, to show thesecurities at fair value. The stock should be classified asavailable-for-sale securities.

(b) Unrealized loss $4,100

c. Show the balance sheet presentation of the investments atDecember 31, 2009. At this date, Ramey Associates has common stock$1,500,000 and retained earnings $1,000,000.

Explanation / Answer

x.P5ze="2">July 1   Cash                             5,000                Dividends Income                       5,000 Aug 1 Cash                             1,000                Dividends Income                       1,000 Sept 1 Cash                                        11,700            Brokerage Fees Expense               300            Loss                                           1,500                Available for sale Securities-Pine Co.                 13,500 Oct 1 Cash                                         25,900            Brokerage Fees Expense             500              Gain                                                              2,400                Available for sale Securities-Hurst Co.                 24,000 Nov 1 Cash                             1,500                Dividends Income                       1,500 Dec 15 Cash                             600                Dividends Income                       600 Dec 31 Cash                             3,500                Dividends Income                       3,500 Cash Dr. Cr. Jul 01 5,000 Aug 01 1,000 Sep 01 11,700 Oct 01 25,900 Nov 01 1,500 Dec 15 600 Dec 31 3,500

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