Question

Rios Financial Co. is a regional insurance company that began operations on January 1, Year 1. The following transactions relate to trading securities acquired by Rios Financial Co., which has a fiscal year ending on December 31:

Record these transactions on page 10:

Year 1
Feb.	1.	Purchased 4,700 shares of Caldwell Inc. as a trading security at $36 per share plus a brokerage commission of $470.
May	1.	Purchased 1,800 shares of Holland Inc. as a trading security at $48 plus a brokerage commission of $198.
July	1.	Sold 2,440 shares of Caldwell Inc. for $34 per share less a $105 brokerage commission.
	31.	Received an annual dividend of $0.35 per share on Caldwell Inc. stock.
Dec.	31.	The portfolio of trading securities was adjusted to fair values of $34 and $47 per share for Caldwell Inc. and Holland Inc., respectively.

Record these transactions on page 11:

Year 2
Apr.	1.	Purchased 3,500 shares of Fuller Inc. as a trading security at $31 per share plus a $175 brokerage commission.
July	31.	Received an annual dividend of $0.40 per share on Caldwell Inc. stock.
Oct.	14.	Sold 700 shares of Fuller Inc. for $33 per share less a $55 brokerage commission.
Dec.	31	The portfolio of trading securities had a cost of $255,124 and a fair value of $331,594, requiring a debit balance in Valuation Allowance for Trading Investments of $76,470 ($331,594 - $255,124). Thus, the credit balance from December 31, Year 1, is to be adjusted to the new balance.

	Required:
1.	Journalize the entries to record these transactions. Round all final amounts to the nearest whole dollar.*
2.	Prepare the investment-related current asset balance sheet presentation for Rios Financial Co. on December 31, Year 2.*
3.	How are unrealized gains or losses on trading investments presented in the financial statements of Rios Financial Co.? *Refer to the information given and the Chart of Accounts and Amount Descriptions provided for the exact wording of the answer choices for text entries. “Less” or “Plus” will automatically appear if it is required. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

3. How are unrealized gains or losses on trading investments presented in the financial statements of Rios Financial Co.?

Unrealized gains or losses on trading investments are reported on the

For Year 1, Rios Financial Co. would have reported an

For Year 2, Rios Financial Co. would have reported an

If unrealized gains and losses were significant for Rios Financial, then they would be

Answer 1

In the books of Rios Financial Company:

Date	Account Titles	Debit	Credit
Year 1		$	$
Feb 1	Trading Investments: Caldwell Inc.	169,670
	Cash		169,670
May 1	Trading Investments: Holland Inc.	86,598
	Cash		86,598
July 1	Cash	82,855
	Loss on Sale of Investments	5,229
	Trading Investments: Caldwell Inc.		88,084
July 31	Cash	791
	Dividend Revenue		791
Dec 31	Unrealized Loss on Trading Investments	6,744
	Valuation Allowance for Trading Investments		6,744
Year 2
Apr 1	Trading Investments : Fuller Inc.	108,675
	Cash		108,675
July 31	Cash	904
	Dividend Revenue		904
Oct 14	Cash	23,045
	Gain on Sale of Investments		1,310
	Trading Investments: Fuller Inc.		21,735
Dec 31	Valuation Allowance for Trading Investments	83,214
	Unrealized Gain on Trading Investments		83,214

2.

Rios Financial Co. Balance Sheet ( Partial ) December 31, Year 2
Assets
Current Assets
Trading Investments , at cost	$ 255,124
Add: Valuation Allowance for Trading Investments	76,470
Trading Investments, at fair value		$ 331,594

3. Unrealized gains or losses on trading investments are reported on the Income Statement of Rios Financial Co. as Other Income or Other Losses respectively.