Question

Amalgamated General Corporation is a consulting firm that also offers financial services through its credit division. From time to time the company buys and sells securities. The following selected transactions relate to Amalgamated’s investment activities during the last quarter of 2018 and the first month of 2019. The only securities held by Amalgamated at October 1 were $60 million of 10% bonds of Kansas Abstractors, Inc., purchased on May 1 at face value and held in Amalgamated’s trading portfolio. The company’s fiscal year ends on December 31.

2018
Oct.		18		Purchased 2 million preferred shares of Millwork Ventures Company for $65 million.
		31		Received semiannual interest of $2.4 million from the Kansas Abstractors bonds.
Nov.		1		Purchased 10% bonds of Holistic Entertainment Enterprises at their $126 million face value, to be held until they mature in 2025. Semiannual interest is payable April 30 and October 31.
		1		Sold the Kansas Abstractors bonds for $53 million because rising interest rates are expected to cause their fair value to continue to fall. No unrealized gains and losses had been recorded on these bonds previously.
Dec.		1		Purchased 12% bonds of Household Plastics Corporation at their $50 million face value, to be held until they mature in 2028. Semiannual interest is payable May 31 and November 30.
		20		Purchased U. S. Treasury bonds for $7.6 million as trading securities, hoping to earn profits on short-term differences in prices.
		21		Purchased 4 million common shares of NXS Corporation for $56 million, planning to earn profits from dividends or gains if prevailing market conditions encourage sale.
		23		Sold the Treasury bonds for $7.8 million.
		29		Received cash dividends of $3 million from the Millwork Ventures Company preferred shares.
		31		Recorded any necessary adjusting entry(s) and closing entries relating to the investments. The market price of the Millwork Ventures Company preferred stock was $30.00 per share and $16.50 per share for the NXS Corporation common. The fair values of the bond investments were $59.1 million for Household Plastics Corporation and $18.7 million for Holistic Entertainment Enterprises.

2019
Jan.		7		Sold the NXS Corporation common shares for $54 million.

Answer 1

No.	Date	Account titles and explanation	Debit	Credit
1	October 18, 2018	Investment in Millwork Ventures preferred shares	65
		Cash		65
2	October 31, 2018	Cash	2.4
		Interest revenue		2.4
3	November 1, 2018	Investment in Holistic Entertainment bonds	126
		cash		126
4	November 1, 2018	Unrealized holding loss—NI (60-53)	7
		Fair value adjustment		7
5	November 1, 2018	Cash	53
		Fair value adjustment	7
		Investment in Kansas Abstractors bonds		60
6	December 1, 2018	Investment in Household Plastics bonds	50
		Cash		50
7	December 20, 2018	Investment in U.S. Treasury bonds	7.6
		Cash		7.6
8	December 21, 2018	Investment in NXS common shares	56
		Cash		56
9	December 21, 2018	Fair value adjustment (7.8-7.6)	0.2
		Unrealized holding gain—NI		0.2
10	December 23, 2018	Cash	7.8
		Investment in U.S. Treasury bonds		7.6
		Fair value adjustment		0.2
11	December 29, 2018	Cash	3
		Dividend revenue		3
12	December 31, 2018	Interest receivable - Holistic Entertainment (126*10%*2/12)	2.1
		Interest receivable - Household Plastics (50*12%*1/12)	0.5
		Interest revenue		2.6
		(to record accrued interest)
13	December 31, 2018	Unrealized holding loss—NI	5
		Fair value adjustment ((2*((65/2)-30)		5
14	December 31, 2018	Fair value adjustment (4*(16.5-(56/4)))	10
		Unrealized holding gain—NI		10
15	January 7, 2019	Unrealized holding loss—NI	12
		Fair value adjustment ((4*16.5)-54)		12
16	January 7, 2019	Cash	54
		Fair value adjustment	2
		Investment in NXS common shares		56

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