Question

Assessing Financial Statement Effects of Trading and Available-for-Sale Securities
Use the financial statement effects template to record the following four transactions involving investments in marketable securities. Assume that these transactions occur in 2018.

Purchased 6,000 common shares of Liu, Inc., at $12.25 cash per share.

Received a cash dividend of $1.50 per common share from Liu.

Year-end market price of Liu common stock is $11.25 per share.

Sold all 6,000 common shares of Liu for $66,300.

Use negative signs with answers, when appropriate.

	Balance Sheet
Transaction	Cash Asset	+	Noncash Assets	=	Liabilities	+	Contributed Capital	+	Earned Capital
(1)	Answer		Answer		Answer		Answer		Answer
(2)	Answer		Answer		Answer		Answer		Answer
(3)	Answer		Answer		Answer		Answer		Answer
(4)	Answer		Answer		Answer		Answer		Answer

Income Statement
Revenue	-	Expenses	=	Net Income
Answer		Answer		Answer
Answer		Answer		Answer
Answer		Answer		Answer
Answer		Answer		Answer

Answer 1

• All working forms part of the answer
• Calculations:

‘a’: Cash paid = 6000 x 12.25 = $ 73,500

‘b’: Dividend received in cash (earned revenue) = 6000 x 1.5 = $ 9000

‘c’: Revaluing stock loss = 6000 shares (12.25 – 11.25) = $ 6,000 loss

‘d’: Cash received $ 66,300 for shares book value of $ 67,500 (73500 – 6000) = $ 1200 Gain

• Answers

	Balance Sheet									Income Statement
Transaction	Cash Asset	+	Noncash	=	Liabilities	+	Contributed	+	Earned	Revenue	-	Expenses	=	Net
			Assets				Capital		Capital					Income
1	$                   (73,500.00)		$               73,500.00		$                                       -		$                                                                 -		$                        -	$                 -		$                  -		$              -
2	$                        9,000.00		$                              -		$                                       -		$                                                                 -		$           9,000.00	$       9,000.00		$                  -		$    9,000.00
3	$                                     -		$               (6,000.00)		$                                       -		$                                                                 -		$        (6,000.00)	$                 -		$        6,000.00		$   (6,000.00)
4	$               66,300.00		$          (67,500.00)		$                            -		$                                                -		$       1,200.00	$       1,200.00		$                  -		$    1,200.00