Question

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.

Answer 1

(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
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