In January 2014, the management of Kvitne Company concludes that it has sufficie

Question

In January 2014, the management of Kvitne Company concludes that it has sufficient cash to permit some short-term investments in debt and stock securities. During the year, the following transactions occured.

Feb 1 Purchased 600 shares of Muninger common stock for $32,400.

Mar 1 Purchased 800 shares of Tatman common stock for $20,000.

Apr 1 Purchased 50 $1000, 7% Yoakem bonds for $50,000. Interest is payable semiannually on April 1 and October 1.

July 1 Received a cash dividend of $0.60 per share on Muninger common stock.

Aug 1 Sold 200 shares of Muninger common stock at $58 per share.

Sept 1 Received a $1 per share cash dividend on the Tatman common stock.

Oct 1 Received the semiannual interest on the Yoakem bonds.

Oct 1 Sold the Yoakem bonds for $49,000.

Instructions

(a) Journalize transactions and post to the accounts Debt Investments and Stock Investments. Specifically T-Accounts method

(b) Show the balance sheet presentation of investment securities at December 31, 2014.

(c) Identify the income statement accounts and give the statement classification of each account.

Explanation / Answer

1-Feb Stock Investment $32,400 cash $32,400 Purchased 600 shares of Muninger common stock for $32,400 1-Mar Stock Investment $20,000 cash $20,000 Purchased 800 shares of Tatman common stock for $20,000 1-Apr Debt Investment $50,000 Cash $50,000 Purchased 50 $1000, 7% Yoakem bonds for $50,000. Interest is payable semiannually on April 1 and October 1. 1-Jul Cash $     360 Dividend revenue $     360 Received a cash dividend of $0.60 per share on Muninger common stock (600 x .60) 1-Aug Cash $11,600 Stock Investment $10,800 Gain on investment $     800 Sold 200 shares of Muninger common stock at $58 per share purchased for $54 per share (32400/600) 1-Sep Cash $     800 Dividend revenue $     800 Received a $1 per share cash dividend on the Tatman common stock (800 x $1) 1-Oct Cash $ 1,750 Interest revenue $ 1,750 Received the semiannual interest on the Yoakem bonds = 50000 x 7% x 6/12 1-Oct Cash $49,000 Loss on sales of debt investment $ 1,000 Debt investment $50,000 Stock investment account 1-Aug Cash $     10,800 1-Feb Cash $     32,400 31-Dec Balance $     41,600 1-Mar Cash $     20,000 $     52,400 Debt Investment 1-Oct Sales $     50,000 1-Apr cash 50000 31-Dec balance $            -   Balance sheet presentation of investment securities as of 12/31/2014 Current assets Short term investment $                          41,600 Income statement account Statement classification Dividend income account Other revenues and gains Interest income Other revenues and gains Loss on sales of investment Other expenses and losses gain on sales of investment Other revenues and gains

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