Assessing Financial Statement Effects of Trading and Available-for-Sale Securiti
ID: 2586747 • Letter: A
Question
Assessing Financial Statement Effects of Trading and Available-for-Sale Securities
Use the financial statement effects template to record the following four transactions involving investments in marketable securities. Assume that these transactions occur in 2018.
Purchased 6,000 common shares of Liu, Inc., at $12 cash per share.
Received a cash dividend of $1.20 per common share from Liu.
Year-end market price of Liu common stock is $11.25 per share.
Sold all 6,000 common shares of Liu for $66,300.
Use negative signs with answers, when appropriate.
Balance Sheet
Noncash
Assets
Contributed
Capital
Earned
Capital
Income Statement
Net
Income
Balance Sheet
Transaction Cash Asset +Noncash
Assets
= Liabilities +Contributed
Capital
+Earned
Capital
(1) Answer Answer Answer Answer Answer (2) Answer Answer Answer Answer Answer (3) Answer Answer Answer Answer Answer (4) Answer Answer Answer Answer AnswerExplanation / Answer
Balance Sheet
Transaction
Cash Asset
+
Noncash
Assets
=
Liabilities
+
Contributed
Capital
+
Earned
Capital
1.Purchased 6,000 common shares at $12
-72,000
72,000
0
0
0
2. Received a cash dividend of $1.20 per common share
7,200
0
0
0
7,200
3. Year-end market price of Liu common stock is $11.25 per share.
Cannot be recorded into books of accounts as it is not a transaction.
0
0
0
0
0
4. Sold all 6,000 common shares of Liu for $66,300.
66,300
-72,000
0
0
-5,700
Income statement
Revenue
-
Expenses
=
Net
Income
1.Purchased 6,000 common shares at $12
0
0
0
2. Received a cash dividend of $1.20 per common share
7,200
0
7,200
3. Year-end market price of Liu common stock is $11.25 per share.
Cannot be recorded into books of accounts as it is not a transaction.
0
0
0
4. Sold all 6,000 common shares of Liu for $66,300.
66,300
-
72,000
=
(5700) Loss
Balance Sheet
Transaction
Cash Asset
+
Noncash
Assets
=
Liabilities
+
Contributed
Capital
+
Earned
Capital
1.Purchased 6,000 common shares at $12
-72,000
72,000
0
0
0
2. Received a cash dividend of $1.20 per common share
7,200
0
0
0
7,200
3. Year-end market price of Liu common stock is $11.25 per share.
Cannot be recorded into books of accounts as it is not a transaction.
0
0
0
0
0
4. Sold all 6,000 common shares of Liu for $66,300.
66,300
-72,000
0
0
-5,700
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