Holly Company invests its excess cash in marketable securities. At the beginning of 2010 it had the following portfolio of investments in available-for-sale securities: 12/31/09 Security Cost Fair Value 400 shares of I Company common stock $ 8,400 $ 9,400 700 shares of O Company common stock 23,100 21,700 Totals $31,500 $31,100 During 2010, the following transactions occurred: Mar. 31 Purchased U Company 8% bonds with a face value of $10,000 for $10,000 plus accrued interest; interest is payable on the bonds each June 30 and December 31 May 17 Sold 200 shares of O Company common stock for $30 per share June 30 Received the semiannual interest on the U Company bonds Oct. 12 Sold 100 shares of I Company common stock for $24 per share Dec. 31 Received the semiannual interest on the U Company bonds and dividends of $1 per share and $1.50 per share on the I and O Company common stock, respectively The December 31 closing market prices were as follows: I Company common stock, $25 per share; O Company common stock, $31 per share; U Company 8% bonds, 101. Required Prepare journal entries to record the preceding information. Show what is reported on the Holly Company’s 2010 income statement. Assuming the investment in I Company stock is considered to be a current asset and the remaining investments are non-current, show how all the items are reported on the December 31, 2010 balance sheet of the Holly Company. If GAAP required that unrealized holding gains and losses on available-for-sale securities be included in income, how much would Holly recognize in 2010?
Holly Company invests its excess cash in marketable securities. At the beginning of 2010 it had the following portfolio of investments in available-for-sale securities:
12/31/09
Security Cost Fair Value
400 shares of I Company common stock $ 8,400 $ 9,400
700 shares of O Company common stock 23,100 21,700
Totals $31,500 $31,100
During 2010, the following transactions occurred:
Mar. 31 Purchased U Company 8% bonds with a face value of $10,000 for $10,000 plus accrued interest; interest is payable on the bonds each June 30 and December 31
May 17 Sold 200 shares of O Company common stock for $30 per share
June 30 Received the semiannual interest on the U Company bonds
Oct. 12 Sold 100 shares of I Company common stock for $24 per share
Dec. 31 Received the semiannual interest on the U Company bonds and dividends of $1 per share and $1.50 per share on the I and O Company common stock, respectively
The December 31 closing market prices were as follows: I Company common stock, $25 per share; O Company common stock, $31 per share; U Company 8% bonds, 101.
Required
- Prepare
journal entries to record the preceding information. - Show what is reported on the Holly Company’s 2010 income statement.
- Assuming the investment in I Company stock is considered to be a current asset and the remaining investments are non-current, show how all the items are reported on the December 31, 2010
balance sheet of the Holly Company. - If GAAP required that unrealized holding gains and losses on available-for-sale securities be included in income, how much would Holly recognize in 2010?
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