Question

Exercise 17-11 Indigo Corporation made the following cash purchases of securities during 2017, which is the first year in which Indigo 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, Indigo 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 Indigo 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.

Prepare the journal entries to record the above three security purchases.

Answer 1

ANSWER

a	The total purchase price of these investment
	Sanchez	(10,050 *$40.20)+2,030	406,040
	Vicario	(5,050 *$62.40)+3,420	318,540
	WTA co	(7,050 *$31.80)+4,960	229,150

DATE	Description	Debit	credit
Jan-15	Equity Investments (Available for sale)	406,040
	Cash		406,040
	(404,010+ commission 2,030)
Apr-01	Equity Investments (Available for sale)	318,540
	Cash		318,540
	(315,120+ commission $3,420)
Sep-10	Equity Investments (Available for sale)	229,150
	Cash		229,150
	(224,190+ commission $4,960)

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