A On September 1, 2012, Ramsey Company purchased the follow for investments clas

Question

A On September 1, 2012, Ramsey Company purchased the follow for investments classified as available-for-sale securities: I. Two thousand shares of Lacey Company capital stock at $43o commission of $5,760. 2. One thousand shares of Membrow Company capital stock at $705.60 plus brok commission of $5,040 er Cash dividends of $18.00 per share on the Lacey capital stock and $14 0 Membrow capital stock were received on December 7 and December er share 10, respectively On December 31, 2012, per share market values are Lacey, $460.80, and M a. Prepare journal entries to record these transactions. b. Prepare the necessary adjusting entry(ies) at December 31, 2012, to ber 31, 2012, to adjust he caming values assuming that market price changes are believed to be te the accounts appear in the financial statements? mpora

Explanation / Answer

For Available for sale securities:

1. Measured at fair value at balance sheet date.

2. Changes in FV will be transferred to unrealized gains or losses.

3. interest or dividend revenues will be recognised in income statement.

Date Particulars Debit Credit 1st Sep 2012 Available for sale Securities - Lacey(2000*439.2)+5760 8,84,160.00 Available for sale Securities - Membrow(1000*705.6)+5040 7,10,640.00 To Cash 15,94,800.00 Being Shares purchased 07th Dec 2012 Cash(2000*18)      36,000.00 To Dividend - Lacey        36,000.00 Being dividend recognised in income statement 10th Dec 2012 Cash(1000*14.4)      14,400.00 To Dividend - Membrow        14,400.00 Being dividend recognised in income statement 31st Dec 2012 Available for Sale Securities - Lacey      37,440.00 To unrealized holding gain or loss (2000*460.8)-884160        37,440.00 Being change in fair value booked as unrealized gain 31st Dec 2012 Unrealized holding gain or loss (1000*655.2)-710640      55,440.00 To Available for Sale Securities - Membrowy        55,440.00 Being change in fair value booked as unrealized loss

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