Hiker Company completes the following transactions during the current year. May

Question

Hiker Company completes the following transactions during the current year.

May 9 Purchases 200 shares of Higo stock as a short-term investment in available-for-sale securities at a cost of $25 per share plus $150 in broker fees.

June 2 Sells 100 shares of its investment in Higo stock at $28 per share. The broker’s commission on this sale is $90.

Dec. 31 The closing market price (fair value) of the Higo stock is $23 per share.

Prepare the May 9 and June 2 journal entries and the December 31 adjusting entry. This is the first and only time the company purchased such securities.(If no entry is required select No journal entry required in the first entry field)

Explanation / Answer

Date General Journal Debit Credit May 09 Short­term investments—AFS (Higo) $5,150 Cash $5,150 Jun 02 Cash $2,710 Gain on sale of short­term investments $135 Short­term investments—AFS (Higo) $2,575 Dec 31 Unrealized loss—Equity $275 Fair value adjustment—Available­for­sale (ST) $275

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