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. |
Journalize the transactions and post to the accounts Debt Investments and Stock Investments. (Use the T-account form.)
Prepare the adjusting entry at December 31, 2012, to report the investment securities at fair value. All securities are considered to be trading securities.
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.
Identify the classification of each account for the income statement accounts.
