During the fourthquarter of 2018, Rainbarrel, Inc. generated excess cash, which the company invested in equitysecurities as follows:Nov 16 Purchased 1,200 common shares as an investment in equity securities,paying $6 per share. Rainbarrel owns less than 10% of the outstandingstock in the companies in which it invests.Dec 16 Received cash dividend of $0.35 per share on the equity securities.Dec 31 Adjusted the equity securities to fair value of $4 per share.2018Requirements1. Open T-accounts for Cash (including its beginning balance of $23,000), Investment inEquity Securities, Dividend Revenue, and Unrealized Gain (Loss) on Equity Securities.2. Journalize the foregoing transactions and post to the T-accounts.3. Show how to report the short-term investment on Rainbarrel’s balance sheet atDecember 31, 2018.4. Show how to report whatever should appear on Rainbarrel’s income statement for the yearended December 31, 2018.5. Rainbarrel sold the equity securities for $6,000 on January 14, 2019. Journalize the sale.
During the fourth
quarter of 2018, Rainbarrel, Inc. generated excess cash, which the company invested in equity
securities as follows:
Nov 16 Purchased 1,200 common shares as an investment in equity securities,
paying $6 per share. Rainbarrel owns less than 10% of the outstanding
stock in the companies in which it invests.
Dec 16 Received cash dividend of $0.35 per share on the equity securities.
Dec 31 Adjusted the equity securities to fair value of $4 per share.
2018
Requirements
1. Open T-accounts for Cash (including its beginning balance of $23,000), Investment in
Equity Securities, Dividend Revenue, and Unrealized Gain (Loss) on Equity Securities.
2. Journalize the foregoing transactions and post to the T-accounts.
3. Show how to report the short-term investment on Rainbarrel’s
December 31, 2018.
4. Show how to report whatever should appear on Rainbarrel’s income statement for the year
ended December 31, 2018.
5. Rainbarrel sold the equity securities for $6,000 on January 14, 2019. Journalize the sale.
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