Question

The following are in DEF Company’s portfolio of long-term available-for-sale

securities at December 31, 2018.

Total Cost

500 shares of Bein Corporation common stock               $26,000

700 shares of Prust Corporation common stock              42,000

600 shares of Gold Corporation preferred stock             16,800

On December 31, the total cost of the portfolio equaled total fair value. DEF Company had

the following transactions related to the securities during 2019.

Jan. 7: Sold 500 shares of Bein Corporation common stock at $56 per share.

Jan. 10: Purchased 200 shares, $70 par value common stock of Wepz Corporation at $78 per share.

Jan. 26: Received a cash dividend of $1.15 per share on Prust Corporation common stock.

Feb. 2: Received cash dividends of $0.40 per share on Gold Corporation preferred stock.

Feb. 10: Sold all 600 shares of Gold Corporation preferred stock at $26 per share.

Jul. 1: Received a cash dividend of $1.00 per share on Prust Corporation common stock.

Sep. 1: Purchased an additional 600 shares of the $70 par value common stock of Wepz Corporation at $75 per share.

Dec. 15: Received a cash dividend of $1.75 per share on Wepz Corporation common stock.

At December 31, 2019, the fair values of the securities were:

Prust Corporation common stock:  $62 per share

          Wepz Corporation common stock:  $73 per share

At December 31, 2019, DEF Company’s Total paid-in capital and retained earnings amounted to $10,000

Instructions

(a) Prepare all journal entries to record the above transactions (Jan 7 to Dec 15).

(b) Post each transaction above to the investment account(s). (Use T account format.)

(c) Prepare the adjusting entry at December 31, 2019, to report the portfolio at fair value.

(d) Show the balance sheet presentation of all related accounts at December 31, 2019.

Answer 1