Question

Carlsville Company, which began operations in 2017, invests its idle cash in trading securities. The following transactions are from its short-term investments in trading securities. 2017 Jan. 20 Purchased 1,000 shares of Ford Motor Co. at $27 per share plus a $130 commission. Feb. 9 Purchased 2,500 shares of Lucent at $38 per share plus a $195 commission. Oct. 12 Purchased 800 shares of Z-Seven at $8.10 per share plus a $95 commission. Dec. 31 Fair value of the short-term investments in trading securities is $133,700. 2018 Apr. 15 Sold 1,000 shares of Ford Motor Co. at $30 per share less a $290 commission. July 5 Sold 800 shares of Z-Seven at $10.75 per share less a $100 commission. July 22 Purchased 1,700 shares of Hunt Corp. at $33 per share plus a $225 commission. Aug. 19 Purchased 1,900 shares of Donna Karan at $44.00 per share plus a $105 commission. Dec. 31 Fair value of the short-term investments in trading securities is $232,225. 2019 Feb. 27 Purchased 3,700 shares of HCA at $35 per share plus a $430 commission. Mar. 3 Sold 1,700 shares of Hunt at $28 per share less a $125 commission. June 21 Sold 2,500 shares of Lucent at $35.75 per share less a $37 commission. June 30 Purchased 1,300 shares of Black & Decker at $47.50 per share plus a $595 commission. Nov. 1 Sold 1,900 shares of Donna Karan at $44.00 per share less a $124 commission. Dec. 31 Fair value of the short-term investments in trading securities is $199,900. Required: 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.

Answer 1

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Date	Account	Debit	Credit
Jan 20 2017	Short term Investment- Trading (Ford)	$ 27,130
	Cash		$   27,130
	(To record purchase of invesment in ford)
	(1,000*$27)+$130
Feb 9 2017	Short term Investment- Trading (Lucent)	$ 95,195
	Cash		$   95,195
	(To record purchase of invesment in Lucent)
	(2,500*$38)+$195
Oct 12 2017	Short term Investment- Trading (Z-seven)	$    6,575
	Cash		$      6,575
	(To record purchase of invesment in Z-Seven)
	(800*$8.10)+$95
Dec 31 2017	Fair value adjustment -Trading	$    4,800
	Unrealized Gain-Income		$      4,800
	(To record adjustment to fair value)
	$133,700-$128,900
Apr 15 2018	Cash ($30*1,000)-$290	$ 29,710
	Gain on sale of short term investment		$      2,580
	Short term Investment- Trading (Ford)		$   27,130
	(To record sale of ford investment)
Jul 5 2018	Cash ($10.75*1800)-$100	$    8,500
	Gain on sale of short term investment		$      1,925
	Short term Investment- Trading (Z-seven)		$      6,575
	(To record sale of Z Seven investment)
Jul 22 2018	Short term Investment- Trading (Hunt)	$ 56,325
	Cash		$   56,325
	(To record purchase of invesment in Hunt)
	(1,700*$33)+$225
Aug 19 2018	Short term Investment- Trading (Donna Karan)	$ 83,705
	Cash		$   83,705
	(To record purchase of invesment in Donna)
	(1,900*$44)+$105
Dec 31 2018	Unrealized Loss-Income	$    7,800
	Fair value adjustment -Trading		$      7,800
	(To record adjustment to fair value)
	$133,700-$128,900
		Cost	Fair Value	Income/(Loss)
	Lucent	$ 95,195
	Hunt	$ 56,325
	Donna	$ 83,705
	Total	$235,225	$ 232,225	$           -3,000
	Debit Balance, Beginning		$      4,800
	Credit Balance, Ending		$    -3,000
	Adjustment to be done		$      7,800
Feb 27 2019	Short term Investment- Trading (HCA)	$129,930
	Cash		$ 129,930
	(To record purchase of invesment in HCA)
	(3,700*$35)+$430
Mar 3 3019	Cash ($28*1,700)-$125	$ 47,475
	Loss on sale of short term investment	$    8,850
	Short term Investment- Trading (Hunt)		$   56,325
	(To record sale of Hunt investment)
Jun 21 2019	Cash ($35.75*2,500)-$37	$ 89,338
	Gain on sale of short term investment		$      5,857
	Short term Investment- Trading (Lucent)		$   95,195
	(To record sale of Lucent investment)
Jun 30 2019	Short term Investment- Trading (B&D)	$ 62,215
	Cash		$   62,215
	(To record purchase of invesment in B&D)
	(1,300*$47.5)+$595
No 1 2019	Cash ($44*1,900)-$124	$ 83,476
	Loss on sale of short term investment	$        229
	Short term Investment- Trading (Donna)		$   83,705
	(To record sale of Donna investment)
Dec 31 2019	Fair value adjustment -Trading	$ 10,755
	Unrealized Gain-Income		$   10,755
	(To record adjustment to fair value)
		Cost	Fair Value	Income/(Loss)
	HCA	$129,930
	B&D	$ 62,215
		$           -
	Total	$192,145	$ 199,900	$            7,755
	Credit Balance, Beginning		$    -3,000
	Debit Balance, Ending		$      7,755
	Adjustment to be done		$ -10,755