Problem C-1A Recording transactions and fair value adjustments for trading secur

Question

Problem C-1A Recording transactions and fair value adjustments for trading securities LO P Carlsville Company, which began operations in 2015, invests its kle cash in trading securitios. The ollowing transactions are from its short-term investments in trading securitles 2015 Jan. 20 Purchased 800 shares of Ford Motor Co at $27 per share plus a $120 commission Feb. 9 Purchased 2,500 shares of Lucent at $34 per share plus a $195 commission Oct. 12 Purchased 700 shares of Z-Seven at $7.10 per share plus a $95 commission Dec. 31 Fair value of the short-term investments in trading securities is $117,300 2016 Apr. 15 Sold 800 shares of Ford Motor Co. at $31 par share less a $295 commission July 5 Sold 700 shares of Z-Seven at $11.00 per share less a $95 commission July 22 Purchased 1,700 shares of Hunt Corp, at $36 per share plus a $225 commission Aug. 19 Purchased 1,800 shares of Donna Karan at $46.00 por share plus a $110 commission Dec. 31 Fair value of the short-tem investments in trading securities in $224,840 2017 Feb. 27 Purchased 4,000 shares of HCA at $38 per share plus a $440 commission. Mar. 3 Sold 1,700 shares of Hunt at $31 per share less a $130 commission. June 21 Sold 2,500 shares of Lucent at $31.75 per share less a $37 commission. June 30 Purchased 1,300 shares of Black&Decker; at $47.50 per share plus a $590 commission. Nov 1 Sold 1,800 shares of Donna Karan at $46.00 per share less a $129 commission. Dec. 31 Fair value of the short-torm investments in trading securitles in $210,000

Explanation / Answer

Date

General Journal

Debit ($)

Credit ($)

2015

Jan-20

Investment in shares of Ford Motors {(800 x 27) +120}

21720

Bank

21720

(Being idle cash invested in shares)

Feb-09

Investment in shares of Lucent {(2500 x 34) +195}

85195

Bank

85195

(Being idle cash invested in shares)

Oct-12

Investment in shares of Z seven {(700 x 7.10) +95}

5165

Bank

5165

(Being idle cash invested in shares)

2016

Apr-15

Bank

24505

Investment in shares of Ford Motors {(800 x 27) +120}

21720

Profit and loss account

2785

(Being the gain on sale of investment credited)

Jul-05

Bank

7605

Investment in shares of Z seven {(700 x 7.10) +95}

5165

Profit and loss account

2440

(Being the gain on sale of investment credited)

Jul-22

Investment in shares of Hun Corp {(1700 x 36) +225}

60975

Bank

60975

(Being idle cash invested in shares)

Aug-19

Investment in shares of Donna Karan {(1800 x 46) +110}

82910

Bank

82910

(Being idle cash invested in shares)

2017

Feb-27

Investment in shares of HCA {(4000 x 38) +440}

152440

Bank

152440

(Being idle cash invested in shares)

Mar-03

Bank (1700 x 31) -130

52570

Profit and loss account (60975 - 52570)

8405

Investment in shares of Hun Corp {(1700 x 36) +225}

60975

(Being investment sold)

Jun-21

Bank (2500 x 31.75) -37

79338

Profit and loss account (85195 - 79338)

5857

Investment in shares of Lucent {(2500 x 34) +195}

85195

(Being investment sold)

Jun-30

Investment in shares of HCA {(1300 x 47.50) +590}

62340

Bank

62340

(Being idle cash invested in shares)

Nov-01

Bank (2500 x 31.75) -37

82671

Profit and loss account (82910 - 82671)

239

Investment in shares of Donna Karan {(1800 x 46) +110}

82910

(Being investment sold)

In case of gain on fair value of short term investment the conservative principle of accounting restricts an organization to record the gain in the books of accounts. Hence, no adjustments in the books of accounts have been made in case of gain on the value of investment at the end of closing dates. In-fact no adjustments have been made in the value of the short term investments.

Date

General Journal

Debit ($)

Credit ($)

2015

Jan-20

Investment in shares of Ford Motors {(800 x 27) +120}

21720

Bank

21720

(Being idle cash invested in shares)

Feb-09

Investment in shares of Lucent {(2500 x 34) +195}

85195

Bank

85195

(Being idle cash invested in shares)

Oct-12

Investment in shares of Z seven {(700 x 7.10) +95}

5165

Bank

5165

(Being idle cash invested in shares)

2016

Apr-15

Bank

24505

Investment in shares of Ford Motors {(800 x 27) +120}

21720

Profit and loss account

2785

(Being the gain on sale of investment credited)

Jul-05

Bank

7605

Investment in shares of Z seven {(700 x 7.10) +95}

5165

Profit and loss account

2440

(Being the gain on sale of investment credited)

Jul-22

Investment in shares of Hun Corp {(1700 x 36) +225}

60975

Bank

60975

(Being idle cash invested in shares)

Aug-19

Investment in shares of Donna Karan {(1800 x 46) +110}

82910

Bank

82910

(Being idle cash invested in shares)

2017

Feb-27

Investment in shares of HCA {(4000 x 38) +440}

152440

Bank

152440

(Being idle cash invested in shares)

Mar-03

Bank (1700 x 31) -130

52570

Profit and loss account (60975 - 52570)

8405

Investment in shares of Hun Corp {(1700 x 36) +225}

60975

(Being investment sold)

Jun-21

Bank (2500 x 31.75) -37

79338

Profit and loss account (85195 - 79338)

5857

Investment in shares of Lucent {(2500 x 34) +195}

85195

(Being investment sold)

Jun-30

Investment in shares of HCA {(1300 x 47.50) +590}

62340

Bank

62340

(Being idle cash invested in shares)

Nov-01

Bank (2500 x 31.75) -37

82671

Profit and loss account (82910 - 82671)

239

Investment in shares of Donna Karan {(1800 x 46) +110}

82910

(Being investment sold)

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