Sport Solutions purchased the following investments in January 2014: Gimli Corpo
ID: 2447768 • Letter: S
Question
Sport Solutions purchased the following investments in January 2014:
Gimli Corporation (500 shares) 10,000
Legolas Internations (1,000 shares) 22,000
Glorfindel Enterprises (2,500 shares) 42,500
U.S. Treasury Bonds 16,400
The Gimli Corporation Stock and the U.S. Treasury bonds were purchased for short-term cash flow management. During 2014 Sport Solutions received 1,760 in dividends and $3,630 in interest. In November Sport Solutions sold 200 shares of Gimli stock at $17 per share and 250 shares of Glorfindel stock at $19 per share. On December 31, the stocks had fair market values, as follows: Gimli, $20 per share; Legolas ($21 per share), Glorfindel ($18 per share), and U.S. Treasury Bonds ($10,000).
Instructions: Record the 2014 journal entries.
Explanation / Answer
january2014 Trading securities Dr. $64500
Available for sale securities Dr. $26400
To cash $90900
(Being securities purchased as investment)
Note:
Legolas Internations (1,000 shares) 22,000
Glorfindel Enterprises (2,500 shares) 42,500
Trading Securities $64500
U.S. Treasury Bonds 16,400
Gimli Corporation (500 shares) 10,000
Available for sale securities $26400
30June cash Dr. $5390
To Dividend $1760
To Interest $ 3630
(Being interest and dividend received against investment)
30November cash Dr. $3400
Loss on sale of investment Dr. $ 600
To Available for sale securities $4000
(Being 200 shares of Gimli stock sold at $17 per share at cost of $4000 { $10000 / 500shares * 200shares] )
30November cash Dr. $4750
To Trading securities $4250
To gain on sale of investment $ 500
( Being 250 shares of Glorfindel stock at $19 per share , cost of $4250 {42500 /2500share* 250 shares} )
31December Trading securities Dr. $1000
To unrealised loss on invetment on legolas $1000
(Being unrealised loss on legolas International booked of $1000 calculation as follows:)
cost of 1000 shares = $22000
less: market price = $ 21000
$ 1000
31 December unrealised gain on glorifinder Dr. $2250
To trading securities $2250
(Being unrealised agin on glorifindal recorded )
cost of remaining (2500 - 250) 2250 share = 38250
Less : market value(2250 * 18) = 40500
(2250)
31December avialable for sale securities Dr. $6400
To unrealised loss on sale $6400
(Being unlrealised loss on sale of treasury bond recorded)
cost of bond = $16400
Less: market price = $10000
$6400
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