In: Accounting
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 |
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Feb. | 1. | Purchased 7,300 shares of Caldwell Inc. as a trading security at $37 per share plus a brokerage commission of $730. |
May | 1. | Purchased 1,800 shares of Holland Inc. as a trading security at $47 plus a brokerage commission of $198. |
July | 1. | Sold 3,800 shares of Caldwell Inc. for $35 per share less a $105 brokerage commission. |
31. | Received an annual dividend of $0.30 per share on Caldwell Inc. stock. | |
Dec. | 31. | The portfolio of trading securities was adjusted to fair values of $35 and $46 per share for Caldwell Inc. and Holland Inc., respectively. |
Record these transactions on page 11:
Year 2 |
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Apr. | 1. | Purchased 4,800 shares of Fuller Inc. as a trading security at $29 per share plus a $240 brokerage commission. |
July | 31. | Received an annual dividend of $0.45 per share on Caldwell Inc. stock. |
Oct. | 14. | Sold 960 shares of Fuller Inc. for $31 per share less a $50 brokerage commission. |
Dec. | 31 | The portfolio of trading securities had a cost of $326,200 and a fair value of $404,846, requiring a debit balance in Valuation Allowance for Trading Investments of $78,646 ($404,846 - $326,200). 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.?
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