In: Accounting
Rios Financial Co. is a regional insurance company that began
operations on January 1, Year 1....
Rios Financial Co. is a regional insurance company that began
operations on January 1, Year 1. The following transactions relate
to trading securities acquired by Rios Financial Co., which has a
fiscal year ending on December 31:
Record these transactions on page 10:
Year 1
|
|
|
Feb. |
1. |
Purchased 6,600
shares of Caldwell Inc. as a trading security at $43 per share plus
a brokerage commission of $660. |
May |
1. |
Purchased 1,800
shares of Holland Inc. as a trading security at $46 plus a
brokerage commission of $198. |
July |
1. |
Sold 3,430 shares
of Caldwell Inc. for $41 per share less a $115 brokerage
commission. |
|
31. |
Received an annual
dividend of $0.25 per share on Caldwell Inc. stock. |
Dec. |
31. |
The portfolio of
trading securities was adjusted to fair values of $41 and $45 per
share for Caldwell Inc. and Holland Inc., respectively. |
Record these transactions on page 11:
Year 2
|
|
|
Apr. |
1. |
Purchased 3,900
shares of Fuller Inc. as a trading security at $28 per share plus a
$195 brokerage commission. |
July |
31. |
Received an annual
dividend of $0.40 per share on Caldwell Inc. stock. |
Oct. |
14. |
Sold 780 shares of
Fuller Inc. for $30 per share less a $45 brokerage commission. |
Dec. |
31 |
The portfolio of
trading securities had a cost of $307,141 and a fair value of
$385,878, requiring a debit balance in Valuation Allowance for
Trading Investments of $78,737 ($385,878 - $307,141). Thus, the
credit balance from December 31, Year 1, is to be adjusted to the
new balance. |
|
Required: |
1. |
Journalize the entries to
record these transactions. Round all final amounts to the nearest
whole dollar.* |
2. |
Prepare the investment-related
current asset balance sheet presentation for Rios Financial Co. on
December 31, Year 2.* |
3. |
How are unrealized gains or losses
on trading investments presented in the financial statements of
Rios Financial Co.?
|
*Refer to the information given and the Chart of Accounts
and Amount Descriptions provided for the exact wording of the
answer choices for text entries. “Less” or “Plus” will
automatically appear if it is required. For those boxes in which
you must enter subtracted or negative numbers use a minus
sign.
CHART
OF ACCOUNTS |
Rios
Financial Co. |
General Ledger |
|
ASSETS |
110 |
Cash |
111 |
Petty Cash |
120 |
Accounts Receivable |
121 |
Allowance for Doubtful
Accounts |
131 |
Notes Receivable |
132 |
Interest Receivable |
141 |
Merchandise Inventory |
145 |
Office Supplies |
146 |
Store Supplies |
151 |
Prepaid Insurance |
161 |
Investments-Caldwell Inc. |
162 |
Investments-Holland Inc. |
163 |
Investments-Fuller Inc. |
165 |
Valuation Allowance for Trading
Investments |
166 |
Valuation Allowance for
Available-for-Sale Investments |
181 |
Land |
191 |
Store Equipment |
192 |
Accumulated Depreciation-Store
Equipment |
193 |
Office Equipment |
194 |
Accumulated Depreciation-Office
Equipment |
|
LIABILITIES |
210 |
Accounts Payable |
221 |
Notes Payable |
231 |
Interest Payable |
241 |
Salaries Payable |
251 |
Sales Tax Payable |
|
EQUITY |
311 |
Common Stock |
312 |
Paid-In Capital in Excess of
Par-Common Stock |
321 |
Preferred Stock |
322 |
Paid-In Capital in Excess of
Par-Preferred Stock |
331 |
Treasury Stock |
332 |
Paid-In Capital from Sale of
Treasury Stock |
340 |
Retained Earnings |
350 |
Unrealized Gain (Loss) on
Available-for-Sale Investments |
351 |
Cash Dividends |
352 |
Stock Dividends |
390 |
Income Summary |
|
|
REVENUE |
410 |
Sales |
611 |
Interest Revenue |
612 |
Dividend Revenue |
631 |
Gain on Sale of Investments |
641 |
Unrealized Gain on Trading
Investments |
|
EXPENSES |
511 |
Cost of Merchandise Sold |
512 |
Bad Debt Expense |
515 |
Credit Card Expense |
516 |
Cash Short and Over |
520 |
Salaries Expense |
531 |
Advertising Expense |
532 |
Delivery Expense |
533 |
Repairs Expense |
534 |
Selling Expenses |
535 |
Rent Expense |
536 |
Insurance Expense |
537 |
Office Supplies Expense |
538 |
Store Supplies Expense |
561 |
Depreciation Expense-Store
Equipment |
562 |
Depreciation Expense-Office
Equipment |
590 |
Miscellaneous Expense |
710 |
Interest Expense |
731 |
Loss on Sale of Investments |
741 |
Unrealized Loss on Tradi |
|
|
|