(b) Prepare the adjusting entry at December 3Balance Sheet (1 Debit/ 1 Credit) $
ID: 2469611 • Letter: #
Question
(b) Prepare the adjusting entry at December 3Balance Sheet (1 Debit/ 1 Credit)
$ ___________________
Identify the classification of each account for the income statement accounts.
-revenues
-other revenues and gains
-other expenses and losses
-operating expenses
-cost of goods sold
Interest revenue -
Loss on sale of debt investments -
Dividend revenue -
Gain on sale of stock investments -
Unrealized loss-Income -1, 2011, to report the investment securities at fair value. All securities are considered to be trading securities.
(c)
Problem E-2 (Part Level Submission) In January 2014, the management of Weast Company concludes that it has sufficient cash to purchase some short-term investments in debt and stock securities. During the year, the following transactions occurred Feb. 1 Mar. 1 Apr. 1 July 1 Aug. 1 Sept. 1 Oct. 1 Oct. 1 Purchased 1,700 shares of ALF common stock for $85,000. Purchased 660 shares of LNC common stock for $23,570 Purchased 50 $1,200, 8% CRT bonds for $60,000. Interest is payable semiannually on April 1 and October 1. Received a cash dividend of $0.70 per share on the ALF common stock. Sold 700 shares of ALF common stock at $49 per share. Received $1 per share cash dividend on the LNC common stock Received the semiannual interest on the CRT bonds. Sold the CRT bonds for $65,500. At December 31, the fair values of the ALF and LNC common stocks were $46 and $29 per share, respectively.Explanation / Answer
$ $ 1-Feb Stock investment ………………………………… 85000 Stock Investments A/C To Cash 85000 1-Feb Pur 85000 1-Aug Sale 34300 1-Mar Stock investment ………………………………… 23750 1-Mar Pur 23750 1-Aug Loss 700 To Cash 23750 108750 Bal 73750 1-Apr Debt Investment ………………………………… 60000 Debt Investment To cash 60000 1-Apr Purchase 60000 1-Oct Sale 60000 1-Jul Cash ………………………………………………… 1190 To Dividend revenue 1190 Bal 0 (1700 * 0.70) (b) Classification: 1-Aug Cash ………………………………………….. 34300 Interest revenue - Other revenue & Gains (700* 49) Loss on sale of debt investments - Other expenses & losses loss on sale of stock……………….. 700 Dividend revenue - Other revenue & Gains To stock Investment 35000 Gain on sale of stock investments - Other revenue & Gains (35000/1700= 50 * 700) Unrealised Loss Income Other expenses & Losses 1-Sep Cash ………………………………………………… 660 To Dividend revenue 660 (660* 1) 1-Oct Cash………………………………………………… 2400 To Interest Revenue 2400 (60000* 8%)=4800/2 1-Oct Cash ………………………………………….. 65500 To Debt Investment 60000 To Gain On sale 5500 (b) Unrealised Loss- Income…………………. 8610 Market Adjustment trading… 8610 (73750-65140) Working: Security Cost Fair Value ALF 50000 46000 (1000*46) LNC 23750 19140 (660*29) Total 73750 65140
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