Mastery Problem: Investments The Wellington Company You are working for The Wellington Company on temporary assignment while one of the accountants is on family leave. You have been asked to review the company’s investment journal entries and provide necessary information to the accountant preparing the financial statements. Journal Date Description Debit Credit Jan. 17 Investments-Red Rock Co. Stock 39,600 Cash 39,600 Feb. 5 Investments-Sunset Village Bonds 36,000 Interest Receivable 310 Cash 36,310 Feb. 23 Investments-Mays and Co. Stock 27,000 Cash 27,000 Mar. 31 Cash 360 Interest Receivable 310 Interest Revenue 50 Apr. 6 Investment in Minions Corp. Stock 180,000 Cash 180,000 Apr. 30 Cash 750 Dividend Revenue 750 Jul. 1 Cash 19,630 Loss on Sale of Investment 190 Interest Revenue 20 Investments-Sunset Village Bonds 19,800 Aug. 14 Cash 41,300 Gain on Sale of Investments 1,800 Investments-Harding Construction Stock 39,500 Aug. 27 Cash 3,600 Investment in Minions Corp. Stock 3,600 Sep. 22 Cash 30,500 Gain on Sale of Investments 3,500 Investments-Mays and Co. Stock 27,000 Sep. 30 Cash 150 Interest Revenue 150 Nov. 1 Investment in Minions Corp. Stock 21,600 Income of Minions Corp. 21,600 Dec. 31 Unrealized Loss on Available-For-Sale Investments 3,275 Valuation Allowance for Available-For-Sale Investments 3,275 Dec. 31 Valuation Allowance for Trading Investments 2,150 Unrealized Gain on Trading Investments 2,150 Question Content Area Investments Review the journal entries on The Wellington Company panel then answer the following questions. 1. Which item is likely to be a trading security? Why? . 2. How are brokerage commission fees treated on stock sales vs. stock purchases? . 3. Based on these journal entries, what is the company’s investment in Sunset Village bonds at the end of the year? $fill in the blank deb57d041fa9012_4. 4. The journal entry on Aug. 27 most likely shows . 5. As an investment, bonds are always categorized as . 6. What is the company’s investment in Minions Corp. at the end of the year? $fill in the blank deb57d041fa9012_7. 7. Which of the following investments are likely to be available-for-sale securities?
Mastery Problem: Investments
The Wellington Company
You are working for The Wellington Company on temporary assignment while one of the accountants is on family leave. You have been asked to review the company’s investment journal entries and provide necessary information to the accountant preparing the financial statements.
| Journal | |||
| Date | Description | Debit | Credit |
| Jan. 17 | Investments-Red Rock Co. Stock | 39,600 | |
| Cash | 39,600 | ||
| Feb. 5 | Investments-Sunset Village Bonds | 36,000 | |
| Interest Receivable | 310 | ||
| Cash | 36,310 | ||
| Feb. 23 | Investments-Mays and Co. Stock | 27,000 | |
| Cash | 27,000 | ||
| Mar. 31 | Cash | 360 | |
| Interest Receivable | 310 | ||
| Interest Revenue | 50 | ||
| Apr. 6 | Investment in Minions Corp. Stock | 180,000 | |
| Cash | 180,000 | ||
| Apr. 30 | Cash | 750 | |
| Dividend Revenue | 750 | ||
| Jul. 1 | Cash | 19,630 | |
| Loss on Sale of Investment | 190 | ||
| Interest Revenue | 20 | ||
| Investments-Sunset Village Bonds | 19,800 | ||
| Aug. 14 | Cash | 41,300 | |
| Gain on Sale of Investments | 1,800 | ||
| Investments-Harding Construction Stock | 39,500 | ||
| Aug. 27 | Cash | 3,600 | |
| Investment in Minions Corp. Stock | 3,600 | ||
| Sep. 22 | Cash | 30,500 | |
| Gain on Sale of Investments | 3,500 | ||
| Investments-Mays and Co. Stock | 27,000 | ||
| Sep. 30 | Cash | 150 | |
| Interest Revenue | 150 | ||
| Nov. 1 | Investment in Minions Corp. Stock | 21,600 | |
| Income of Minions Corp. | 21,600 | ||
| Dec. 31 | Unrealized Loss on Available-For-Sale Investments | 3,275 | |
| Valuation Allowance for Available-For-Sale Investments | 3,275 | ||
| Dec. 31 | Valuation Allowance for Trading Investments | 2,150 | |
| Unrealized Gain on Trading Investments | 2,150 |
Question Content Area
Investments
Review the journal entries on The Wellington Company panel then answer the following questions.
1. Which item is likely to be a trading security?
Why?
.
2. How are brokerage commission fees treated on stock sales vs. stock purchases?
.
3. Based on these journal entries, what is the company’s investment in Sunset Village bonds at the end of the year? $fill in the blank deb57d041fa9012_4.
4. The
.
5. As an investment, bonds are always categorized as
.
6. What is the company’s investment in Minions Corp. at the end of the year? $fill in the blank deb57d041fa9012_7.
7. Which of the following investments are likely to be available-for-sale securities?
.
Question Content Area
Financial Statements and Valuation
The accountant preparing the financial statements has asked you to provide the fair value as of the end of the year for the investments. Present the information as it would be shown on the financial statements. Last year, The Wellington Company reported costs of $68,000 in trading investments and $82,000 in available-for-sale investments. Refer to the journal entries shown on The Wellington Company panel. Assume that all investments sold during this year were trading investments and that purchases during the year were new investments.
1. Select the correct label for each line and fill in the amount. In classifying the investments, choose a categorization which seems most likely, given the pattern of transactions in the journal entries. Enter all amounts as positive numbers. If an amount box does not require an entry, leave it blank.
| Trading Securities | |
|
|
$fill in the blank 73dda2069024015_2 |
|
|
fill in the blank 73dda2069024015_4 |
|
|
$fill in the blank 73dda2069024015_6 |
| Available-For-Sale Securities | |
|
|
$fill in the blank 73dda2069024015_8 |
|
|
fill in the blank 73dda2069024015_10 |
|
|
$fill in the blank 73dda2069024015_12 |
2. Where on the
.
3. Where on the financial statements do available-for-sale securities NOT appear?
.
4. Where are held-to-maturity securities reported?
. Based on the journal entries for this year, does the company have any held-to-maturity securities?
.
5. Where are securities held for strategic reasons reported on the financial statements when using the equity method?
. Based on the journal entries for this year, does The Wellington Company have any equity securities?
.
6. Which of the following items does not affect net income?
.
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