On July 1, 2018, Wolfpack Corporation purchased securities which it intends to b
ID: 2542078 • Letter: O
Question
On July 1, 2018, Wolfpack Corporation purchased securities which it intends to buy and sell frequently. These securities consisted of (a) Todd Corporation 10%, 5-year bonds with a face value of $20,000 which were purchased for $18,500 and (b) 300 shares of Cornett Company common stock which were purchased at $40 per share. The investment in Cornett Company stock has a market value of $10,500 that was properly reported on Cornett’s most recent balance sheet. Assume that on February 1, 2019, Wolfpack sold its investment in Cornett stock for $10,000. Required: Prepare the journal entries of Wolfpack to record the sale. Refer to the Chart of Accounts for exact wording of account titles.
Prepare the journal entries of Wolfpack to record the sale on February 1, 2019. Refer to the Chart of Accounts for exact wording of account titles.
Explanation / Answer
Date accounts Title Dr Cr Feb 1 2019 Cash $10,000 Loss on Tradibg securities $500 Trading Securities/ Investment in Cornett-Trading securities 10500 (Record of sle of investment in trading securities) On Dec 31 2018 an unrealized loss entry would have been passed and for trading securities the unrealized loss of $1500 (12000-10500) is shown in Income statement. Hence on Feb 1 2019 the loss of $500 is recognized If any doubt please comment
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