During January 2017, Long Corporation for the first time decided to acquire some
ID: 2589244 • Letter: D
Question
During January 2017, Long Corporation for the first time decided to acquire some equity securities as a means of putting some of its idle cash to work. The securities are classified as trading securities. At March 31, when Long prepares its first quarter financial statements, the following information about the acquired securities is available:
Securities
Cost
Market
1
$52,000
$50,000
2
32,000
29,000
3
35,000
27,000
Required:
a.
Prepare the journal entries to record the acquisition in January and valuation at the end of the first quarter of 2017.
b.
Assume that on June 30, 2017, the company still has this same portfolio. The market value of 1 is $57,000, 2 is $30,000, and 3 is $31,000. What journal entry, if any, should be prepared at the end of the second quarter?
c.
On August 15, 2017, Long Corporation sold Security 3 for $33,000. Prepare the journal entry to record this transaction.
Securities
Cost
Market
1
$52,000
$50,000
2
32,000
29,000
3
35,000
27,000
Explanation / Answer
a.journal entries showing the acquistion of securities with valuation.
securitis-1 a/c dr
To cash a/c cr
$52,000
securitis-2 a/c dr
To cash a/c cr
$32,000
securitis-3 a/c dr
To cash a/c cr
valuation at the end of quarter will be valued at cost and not market price so the value will be the same as when purchased.
b.at the end of second quater also market value is not considered because market value of securities is mere fluctuations in the economy
so there is no need to pass journal entries with regard to fluctuations in the market.
c.showing journal entry when security-3 is sold
cash a/c dr
loss on sale of security
To Security-3 a/c
date particulars debit($) credit($) jan-2017securitis-1 a/c dr
To cash a/c cr
$52,000
$52,000securitis-2 a/c dr
To cash a/c cr
$32,000$32,000
securitis-3 a/c dr
To cash a/c cr
$35,000 $35,000Related Questions
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