Question

Carlsville Company, which began operations in 2015, invests its idle cash in trading securities. The following transactions are from its short-term investments in trading securities. 2015 Jan. 20 Purchased 800 shares of Ford Motor Co. at $26 per share plus a $125 commission. Feb. 9 Purchased 2,200 shares of Lucent at $44.25 per share plus a $578 commission. Oct. 12 Purchased 750 shares of Z-Seven at $7.50 per share plus a $200 commission. Dec. 31 Fair value of the short-term investments in trading securities is $130,000. 2016 Apr. 15 Sold 800 shares of Ford Motor Co. at $29 per share less a $285 commission. July 5 Sold 750 shares of Z-Seven at $10.25 per share less a $102.50 commission. July 22 Purchased 1,600 shares of Hunt Corp. at $30 per share plus a $444 commission. Aug. 19 Purchased 1,800 shares of Donna Karan at $18.25 per share plus a $290 commission. Dec. 31 Fair value of the short-term investments in trading securities is $160,000. 2017 Feb. 27 Purchased 3,400 shares of HCA at $34 per share plus a $420 commission. Mar. 3 Sold 1,600 shares of Hunt at $25 per share less a $250 commission. June 21 Sold 2,200 shares of Lucent at $42 per share less a $420 commission. June 30 Purchased 1,200 shares of Black & Decker at $47.50 per share plus a $595 commission. Nov. 1 Sold 1,800 shares of Donna Karan at $18.25 per share less a $309 commission. Dec. 31 Fair value of the short-term investments in trading securities is $180,000. Required: 1. Prepare journal entries to record these short-term investment activities for the years shown. On December 31 of each year, prepare the adjusting entry to record any necessary fair value adjustment for the portfolio of trading securities.(If no entry is required select No journal entry required in the first entry field. Do not round your intermediate calculations.)

Answer 1

SOLUION:

Date	Particulars	Debit	Credit
Jan-20	Shortterm investments—Trading (Ford)	20,925
	Cash		20,925
	[(800 × $26.00) + $125] = $20,925
Feb-09	Shortterm investments—Trading (Lucent)	97,928
	Cash		97,928
	[(2,200 × $44.25) + $578] = $97,928
Oct-12	Shortterm investments—Trading (ZSeven)	5,825
	Cash		5,825
	[(750 × $7.50) + $200] = $5,825
Dec-31	Fair value adjustment—Trading (ST)	5,322
	Unrealized gain—Income		5,322
	130,000 fair value - $124,678 cost
Apr-15	Cash	22,915
	Gain on sale of shortterm investments		1,990
	Shortterm investments—Trading (Ford)		20,925
	[(800 × $29.00) − $285] = $22,915
Jul-05	Cash	7,585
	Gain on sale of shortterm investments		1,760
	Shortterm investments—Trading (Zseven)		5,825
	[(750 × $10.25) − $102.50] = $7,585
Jul-22	Shortterm investments—Trading (Hunt)	48,444
	Cash		48,444
	[(1,600 × $30.00) + $444] = $48,444
Aug-19	Shortterm investments—Trading (D.Karan)	33,140
	Cash		33,140
	[(1,800 × $18.25) + $290] = $33,140
Dec-31	Unrealized loss—Income	24,834
	Fair value adjustment—Trading (ST)		24,834
	$160,000 fair value − $179,512 cost* = $19,512
	$19,512 + $5322 = $24,834
,
Feb-27	Shortterm investments—Trading (HCA)	116,020
	Cash		116,020
	[(3,400 × $34.00) + $420] = $116,020
Mar-03	Cash	39,750
	Loss on sale of short term investments	8,694
	Shortterm investments—Trading (Hunt)		48,444
	[(1,600 × $25.00) − $250] = $39,750
Jun-21	Cash	91,980
	Loss on sale of shortterm investments	5,948
	Shortterm investments—Trading (Lucent)		97,928
	[(2,200 × $42.00) − $420] = $91,980
Jun-30	Shortterm investments—Trading (B&D)	57,595
	Cash		57,595
	[(1,200 × $47.50) + $595] = $57,595
Nov-01	Cash	32,541
	Loss on sale of shortterm investments	599
	Shortterm investments—Trading (D.Karan)		33,140
	[(1,800 × $18.25) − $309] = $32,541
Dec-31	Fair value adjustment—Trading (ST)	25,897
	Unrealized Gain—Income		25,897
	$180,000 fair value - $173,615 = $6,385; 19512 + 6385 = 25,897