Saturday, 3 January 2015

In January 2012, the management of Stefan Company concludes that it has sufficient cash to permit some short-term investments in debt and stock securities. During the year, the following transactions occurred.

AP16-2A

In January 2012, the management of Stefan Company concludes that it has sufficient cash to permit some short-term investments in debt and stock securities. During the year, the following transactions occurred.
Feb. 1 Purchased 600 shares of Superior common stock for $31,800, plus brokerage fees of $420.
Mar. 1 Purchased 680 shares of Pawlik common stock for $17,000, plus brokerage fees of $330.
Apr. 1 Purchased 40 $1,200, 8% Venice bonds for $48,000, plus $1,200 brokerage fees. Interest is payable semiannually on April 1 and October 1.
July 1 Received a cash dividend of $0.58 per share on the Superior common stock.
Aug. 1 Sold 150 shares of Superior common stock at $63 per share less brokerage fees of $200.
Sept. 1 Received a $1 per share cash dividend on the Pawlik common stock.
Oct. 1 Received the semiannual interest on the Venice bonds.
Oct. 1  Sold the Venice bonds for $48,000 less $1,200 brokerage fees.
At December 31, the fair value of the Superior common stock was $55 per share. The fair value of the Pawlik common stock was $24 per share.

Journalize the transactions and post to the accounts Debt Investments and Stock Investments. (Use the T-account form.)

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Prepare the adjusting entry at December 31, 2012, to report the investment securities at fair value. All securities are considered to be trading securities.
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Explanation
Security               Cost      Fair Value 
Superior common$24,165$24,750(450 × $55)
Pawlik common
17,330
16,320
(680 × $24)
 
$41,495
$41,070


Show the balance sheet presentation of investment securities at December 31, 2012. 


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Identify the classification of each account for the income statement accounts.

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