Question
In: Accounting
Swifty Corporation made the following cash purchases of securities during 2017, which is the first year...
Swifty Corporation made the following cash purchases of securities during 2017, which is the first year in which Swifty invested in securities. 1. On January 15, purchased 10,050 shares of Sanchez Company’s common stock at $40.20 per share plus commission $2,030. 2. On April 1, purchased 5,050 shares of Vicario Co.’s common stock at $62.40 per share plus commission $3,420. 3. On September 10, purchased 7,050 shares of WTA Co.’s preferred stock at $31.80 per share plus commission $4,960. On May 20, 2017, Swifty sold 4,050 shares of Sanchez Company’s common stock at a market price of $42 per share less brokerage commissions, taxes, and fees of $3,900. The year-end fair values per share were Sanchez $36, Vicario $66, and WTA $33.60. In addition, the chief accountant of Swifty told you that the corporation plans to hold these securities for the long-term but may sell them in order to earn profits from appreciation in prices. The equity method of accounting is not appropriate for these stock purchases.
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Expert Solution
| Date | Account Tittle | Debit | Credit |
| 15-Jan | Availble for Sale Securities- Sanchez | 406040 | |
| Cash ((10050X$40.20)+ $2030) | 406040 | ||
| (Purchase of Securities - Common Stock) | |||
| 01-Apr | Availble for Sale Securities- Vicario | 318540 | |
| Cash ((5050X$62.40)+$3420) | 318540 | ||
| (Purchase of Securities - Common Stock) | |||
| 10-Sep | Availble for Sale Securities- WTA Co. | 229150 | |
| Cash (7050X $31.80)+$4960 | 229150 | ||
| (Purchase of Securities - Preferred Stock) | |||
| Journal Entries | |||
| Date | Account Tittle | Debit | Credit |
| 20-May | Cash ((4050X$42)-$3900) | 166200 | |
| Availble for Sale Securities- Sanchez | 163628 | ||
| Gain on Sales of Securrities {(($42- (406040/10050))X4050}-$3900 |
2572 | ||
| (Sale of Securities- Common Stock) |
| Calculation of Unrealized Gain /Loss |
| Sanchez |
| =(($36X(10050-4050))- ($406040-$163628))= ($26412) |
| Vicario |
| =($5050*$66)-$318540= $14760 |
| WTA Co. |
| =(7050*$33.60)-$163628=$73252 |
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