Question

Jia Inc. has the following securities in its investments portfolio on December 31, 2010. These investments were purchased within 2010.

i. 700 shares of Wirjanto Corp. common shares, which cost $20,000 and had a fair value of $25,000 at the end of 2010. This is accounted for by Jia Inc. as an Available-For-Sale investment.

ii. 900 shares of MLT Corp. common shares, which cost $30,000 and had a fair value of  $45,000 at the end of 2010. This is accounted for by Jia Inc. as an Available-For-Sale Investment.  

iii. Delacosta Ltd. 10% bonds, $100,000 par value, purchased for $125,000; amortized cost was $110,000 at the end of 2010. The market rate of the bonds was 8% when acquired, and interest is paid annually at the end of each year.

In 2011, the following transactions occurred:

1. January 1: A cash dividend was received from Wirjanto Corp shares at a price of $2 per share.

2. April 1: Jia Inc. sold the MLT Corp. common shares for $40,000.

3. July 1: Jia Inc. purchased 500 shares of Gardi Inc. for $10 per share. (This is accounted for by Jia Inc. as a Held-For-Trading Investment)

4. October 1: 100 shares of Wirjanto Corp. were sold for $5,000.

5. December 31: Annual interest was received on the Delacosta Ltd. bond. (Interest revenue is measured using the effective-interest method)

6. December 31: Market values per share are:

Wirjanto Corp.	$45
MLT Corp.	$55
Gardi Inc.	$8

Instructions:

Journalize the events from 2011 for Jia Inc.

Note: The company records dividends, interest income, amortization and holding gains (losses) separately to facilitate tax preparation.

Answer 1

Date	Particulars	Debit $	Credit $
Jan-01	Cash	$   1,400
	Dividend received		$   1,400
	[Dividend from W co.]
Apr-01	Cash	$ 40,000
	MLT corp common stock - AFS		$ 30,000
	Gain on sale		$ 10,000
	[900 shares of MLT corp. sold]
Jul-01	G Inc. common stock - HFT	$   5,000
	AFS		$   5,000
	[500 shares of G Inc purchased]
Oct-01	Cash	$   5,000
	W corp common stock - AFS		$   2,857
	Gain on sale		$   2,143
	[100 shares of W corp sold]
Dec-31	Cash	$ 10,000
	Interest income		$ 10,000
	[Interest on D ltd 10% bonds received]
Dec-31	Valuation allowance for W corp AFS security	$   9,857
	Unrealized gain on AFS security (A.OCI)		$   9,857
	[W corp securities adjusted to fair value]
Dec-31	Unrealized loss on trading security	$   1,000
	Valuation allowance for G corp Trading security		$   1,000
	[G corp securities adjusted to fair value]
Dec-31	Amortization expense	$ 15,000
	Accumulated Amortization		$ 15,000
	[Bonds of D Ltd amortized]

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