Question

During 2016, Dana Company decided to begin investing its idle cash in marketable securities. The information contained below relates to Dana’s 2016 marketable security transactions:

Feb. 3	Purchased 3,000 shares of Blair Company common stock for $12 per share.
Apr. 1	Purchased $20,000 face value of Solomon Inc. 12% bonds at par plus accrued interest; interest on the bonds is payable each June 30 and December 31.
Jun. 30	Received the semiannual interest on the Solomon bonds and a $0.25 per share dividend on the Blair common stock.
Sept. 1	Purchased 4,000 shares of Woodman Corporation common stock for $22 per share.
Nov. 1	Purchased $30,000 face value of Edwards Company 11% bonds at par plus accrued interest; interest on the bonds is payable each June 1 and December 1.
Dec. 1	Received the interest on the Edwards bonds and sold the bonds for $30,300.
Dec. 30	Received a $0.25 dividend per share on the Blair common stock and sold all the shares for $35,300.
Dec. 31	Received the interest on the Solomon bonds. The following information is available concerning the year-end market prices:

Security	Quoted Market
Solomon 12% bonds	$20,200
Woodman common (per share)	23

Required:

1.	Record Dana’s investment transactions for 2016.
2.	Show the items of income or loss on temporary investments Dana reports on its 2016 income statement.
3.	Show the carrying value of Dana’s investment account on its December 31, 2016, balance sheet.

Answer 1

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Part 1
Date	Account	Debit	Credit
Feb 3	Investment in Available-for-Sale Securities	$                  36,000
	Cash (3,000 x $12)		$                              36,000
Apr 1	Investment in Available-for-Sale Securities	$                  20,000
	Interest Revenue ($20,000 x12%*3/12)	$                        600
	Cash		$                              20,600
Jun 30	Cash	$                     1,950
	Interest Revenue ($20,000 x12%*6/12)		$                                1,200
	Dividend Revenue (3,000 x $0.25)		$                                   750
Sep 1	Investment in Available-for-Sale Securities	$                  88,000
	Cash (4,000 x $22)		$                              88,000
Nov 1	Investment in Available-for-Sale Securities	$                  30,000
	Interest Revenue ($30,000*11%*5/12)	$                     1,375
	Cash		$                              31,375
Dec 1	Cash	$                     1,650
	Interest Revenue ($30,000 x11%*6/12)		$                                1,650
Dec 1	Cash ($30,000 x 1.01)	$                  30,300
	Investment in Available-for-Sale Securities		$                              30,000
	Gain on Sale of Available-for-Sale Securities		$                                   300
Dec 30	Cash	$                        750
	Dividend Revenue (3,000 x $0.25)		$                                   750
Dec 30	Cash	$                  35,300
	Loss on Sale of Available-for-Sale	$                        700
	Investment in Available-for-Sale Securities		$                              36,000
Dec 31	Cash	$                     1,200
	Interest Revenue ($20,000 x12%*6/12)		$                                1,200
Dec 31	Allowance for Change in Value of Investment	$                     4,200
	Unrealized Increase/Decrease in AFS securities		$                                4,200
		Cost	Fair Value	Change in Fair Vlaue
	$20,000 face value of Solomon Co. bonds	$                  20,000	$                              20,200	$                                           200
	4,000 shares of Woodman Corp. common stock	$                  88,000	$                              92,000	$                                        4,000
	Totals	$                108,000	$                            112,200	$                                        4,200
	Fair Value 4000 shares*$23
Part 2
	Interest revenue	(-$600+$1,200-$1,375+$1,650+$1,200)	$                                2,075
	Dividend revenue	($750+$750)	$                                1,500
	Gain on sale of securities		$                                   300
	Loss on sale of securities		$                                  -700
Part 3
	Current assets:
	Temporary investment in available-for-sale securities	at Cost	$                            108,000
	(at cost)
	Plus: Allowance for change in value of investment		$                                4,200
	Temporary investment in available-for-sale securities	at Fair value	$                            112,200