Question

The following securities are in Frederick Company’s portfolio of long-term available-for-sale securities at December 31, 2017.

                                                                                                             Cost

 

1,000 shares of Willhite Corporation common stock.............................$52,000

1,400 shares of Hutcherson Corporation common stock.......................84,000

1,200 shares of Downing Corporation preferred stock...........................33,600

 

On December 31, 2017, the total cost of the portfolio equaled total fair value. Frederick had the following transactions related to the securities during 2018.

Jan. 20 Sold all 1,000 shares of Willhite Corporation common stock at $55 per share.

28 Purchased 400 shares of $70 par value common stock of Liggett Corporation at $78 per share.

30 Received a cash dividend of $1.15 per share on Hutcherson Corp. common stock.

Feb. 8 Received cash dividends of $0.40 per share on Downing Corp. preferred stock.

18 Sold all 1,200 shares of Downing Corp. preferred stock at $27 per share.

July 30 Received a cash dividend of $1.00 per share on Hutcherson Corp. common stock.

Sept. 6 Purchased an additional 900 shares of $10 par value common stock of Liggett Corporation at $82 per share.

 

Dec. 1 Received a cash dividend of $1.50 per share on Liggett Corporation common stock.

At December 31, 2018, the fair values of the securities were:

Hutcherson Corporation common stock............................$64 per share

Liggett Corporation common stock......................................$72 per share

 

Instructions

(a) Prepare journal entries to record the transactions.

(b) Post to the investment accounts. (Use T-accounts.)

(c) Prepare the adjusting entry at December 31, 2018 to report the portfolio at fair value.

(d) Show the balance sheet presentation at December 31, 2018, for the investment-related accounts.

Answer 1

The following securities are in Frederick Company’s portfolio of long-term available-for-sale securities at December 31, 2017.

                                                                                                             Cost

 

1,000 shares of Willhite Corporation common stock.............................$52,000

1,400 shares of Hutcherson Corporation common stock.......................84,000

1,200 shares of Downing Corporation preferred stock...........................33,600

 

 

On December 31, 2017, the total cost of the portfolio equaled total fair value. Frederick had the following transactions related to the securities during 2018.

 

 

SOLUTION:

(a)

 

(b)

 

(c)

 

(d)

(a)