Exercise 15-6 Transactions in short-term and long-term investments LO P1, P2, P3

Question

Exercise 15-6 Transactions in short-term and long-term investments LO P1, P2, P3 a. On February 15, paid $160,000 cash to purchase American General's 90-day short-term notes at par, which are dated February 15 and pay 10% interest (classified as held-to-maturity) b. On March 22, bought 700 shares of Fran Industries common stock at $51 cash per share plus a $150 brokerage fee (classified as long-term available-for-sale securities) c. On May 15, received a check from American General in payment of the principal and 90 days' interest on the notes purchased in transaction a. d. On July 30, paid $100,000 cash to purchase MP3 Electronics's 8% notes at par, dated July 30, 2017, and maturing on January 30 2018 (classified as trading securities). e. On September 1, received a $1.00 per share cash dividend on the Fran Industries common stock purchased in transaction b. f. On October 8, sold 350 shares of Fran Industries common stock for $64 cash per share, less a $125 brokerage fee g. On October 30, received a check from MP3 Electronics for three months' interest on the notes purchased in transaction d. Prepare journal entries to record the above transactions involving both the short-term and long-term investments of Cancun Corp., all of which occurred during calendar-year 2017. Use the account Short-Term Investments for any transactions that you determine are short term. (Use 360 days in a year. Do not round your intermediate calculations.)

Explanation / Answer

Date Accounts title and Explanation Debit Credit 15-Feb Short term invetments 160000 Cash 160000 ( To record the short term investment in american general) 22-Mar Long term investments (700*51+150) 35850 Cash 35850 ( To record the long term investment in frans industries) 15-May Cash 164000 Short term investments -hold to maturity 160000 Interest revenue (160000*10%*3/12) 4000 ( To record the receipt of note installment) 30-Jul Short term investments -trading 100000 cash 100000 (To record the purchase of the notes 1-Sep Cash 700 Dividend revenue 700 ( To record the dividend revenue) 8-Oct cash (350*64-125) 22275 Long term investments (350*51) 17850 Gain on sale of the shares 4425 ( To record the sale of the shares) 30-Oct Cash (100000*8%*3/12) 2000 Interest revenue 2000 ( to record the interest revenue)

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.