In: Accounting
In January 2020, the management of Oriole Company concludes that
it has sufficient cash to permit some short-term investments in
debt and stock securities. During the year, the following
transactions occurred.
Feb. 1 | Purchased 800 shares of Muninger common stock for $44,000. | |
Mar. 1 | Purchased 1,000 shares of Tatman common stock for $25,000. | |
Apr. 1 | Purchased 70 $1,240, 9% Yoakem bonds for $86,800. Interest is payable semiannually on April 1 and October 1. | |
July 1 | Received a cash dividend of $0.50 per share on the Muninger common stock. | |
Aug. 1 | Sold 266 shares of Muninger common stock at $65 per share. | |
Sept. 1 | Received a $1 per share cash dividend on the Tatman common stock. | |
Oct. 1 | Received the semiannual interest on the Yoakem bonds. | |
Oct. 1 | Sold the Yoakem bonds for $85,800. |
At December 31, the fair value of the Muninger common stock was $56
per share. The fair value of the Tatman common stock was $24 per
share.
a.
Journalize the transactions and post to the accounts Debt
Investments and Stock Investments. (Use the T-account form.)
(Record journal entries in the order presented in the
problem. Credit account titles are automatically indented when
amount is entered. Do not indent manually. If no entry is required,
select "No entry" for the account titles and enter 0 for the
amounts.)
b.
Prepare the adjusting entry at December 31, 2020, to report the
investment securities at fair value. All securities are considered
to be trading securities. (Credit account titles are
automatically indented when amount is entered. Do not indent
manually. If no entry is required, select "No entry" for the
account titles and enter 0 for the amounts.)
c.
Show the balance sheet presentation of investment securities at December 31 2020
d.
give the statement classification of each income statement account.
(a) | DATE | DESCRIPTION | DEBIT | CREDIT | |||
Feb 1. | Stock investments-Muninger | 44000 | |||||
Cash | 44000 | ||||||
(Purchased 800 shares of Muninger) | |||||||
Mar 1. | Stock investments-Tatman | 25000 | |||||
Cash | 25000 | ||||||
(Purchased 1000 shares of Tatman) | |||||||
Apr 1. | Debt investments-Yoakem bonds | 86800 | |||||
Cash | 86800 | ||||||
(Purchased 70 $1240,9% yoakem bonds) | |||||||
July 1. | Cash | (800*0.50) | 400 | ||||
Dividend income | 400 | ||||||
(Received cash dividend) | |||||||
Aug 1. | Cash | (266*65) | 17290 | ||||
Realized gain on trading securities | 2660 | ||||||
Stock investments-Muninger | |||||||
(44000/800)*266 | 14630 | ||||||
(Sale of 266 shares of Muninger) | |||||||
Sep 1. | Cash | (1000*1) | 1000 | ||||
Dividend income | 1000 | ||||||
(Received cash dividend) | |||||||
Oct 1. | Cash | (86800*9%*6/12) | 3906 | ||||
Interest income | 3906 | ||||||
(Received semi-annual interest on bond ) | |||||||
Oct 1. | Cash | 85800 | |||||
Realized loss on debt investments | 1000 | ||||||
Debt investments-Yoakem bonds | 86800 | ||||||
(Sold the yoakem bonds) | |||||||
Stock investments-Muninger | |||||||
Date | Account titles | Debit | Credit | Balance | |||
Feb 1. | Cash | 44000 | 44000 | ||||
Aug 1. | Cash | 14630 | 29370 | ||||
Stock investments-Tatman | |||||||
Date | Account titles | Debit | Credit | Balance | |||
Mar 1. | Cash | 25000 | 25000 | ||||
Debt investments-Yoakem bonds | |||||||
Date | Account titles | Debit | Credit | Balance | |||
Apr 1. | Cash | 86800 | 86800 | ||||
Oct 1. | Cash | 85800 | 1000 | ||||
Oct 1. | Realized loss on debt investments | 1000 | 0 | ||||
b. |
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December 31
2020
2019
Current assets
Cash and cash equivalents
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$360
Accounts receivable (net)
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590
Inventory
600
530
Prepaid expenses
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160
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Intangibles and other assets
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Land
263,320
Buildings
1,042,560
Dividends Payable
138,560
Accrued Liabilities
99,320
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