Rios Co. is a regional insurance company that began operations on January 1, 20Y2. The following selected transactions relate to investments acquired by Rios Co., which has a fiscal year ending on December 31: Record these transactions on page 10: 20Y2 Feb. 1 Purchased 4,900 shares of Caldwell Inc. common stock at $35 per share plus a brokerage commission of $490. Caldwell has 100,000 shares of common stock outstanding. May 1 Purchased securities of Holland Inc. as a trading investment for $84,798. July 1 Sold 2,550 shares of Caldwell Inc. for $33 per share less a $95 brokerage commission. 31 Received an annual dividend of $0.30 per share on 2,350 shares of Caldwell Inc. stock. Nov. 15 Sold the remaining shares of Caldwell Inc. for $36 per share less a $75 brokerage commission. Dec. 31 The trading securities of Holland Inc. have a fair value on December 31 of $77,865. Record these transactions on page 11: 20Y3 Apr. 1 Purchased securities of Fuller Inc. as a trading investment for $125,040. Oct. 14 Sold securities of Fuller Inc. that cost $25,008 for $26,850. Dec. 31 The fair values of the Holland Inc. and Fuller Inc. securities are as follows: Issuing Company Cost Fair Value Holland Inc. $84,798 $184,830 Fuller Inc. 100,032 79,620 Required: 1. Journalize the entries to record the preceding transactions, including any December 31 adjusting entries. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered. Round your intermediate calculations to two decimal places and round your final answers to the nearest dollar. 2. Prepare the Trading Investments section of the December 31, 20Y3, balance sheet for Rios Co. Be sure to complete the statement heading. Refer to the Chart of Accounts and the list of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Colons (:) will fill in where needed. 3. How are unrealized gains or losses on trading investments presented on the financial statements of Rios Co.? CHART OF ACCOUNTS Rios Co. General Ledger ASSETS 110 Cash 111 Petty Cash 120 Accounts Receivable 121 Allowance for Doubtful Accounts 131 Notes Receivable 132 Interest Receivable 141 Merchandise Inventory 145 Office Supplies 146 Store Supplies 151 Prepaid Insurance 161 Investments-Caldwell Inc. Stock 162 Trading Investments-Holland Inc. 163 Trading Investments-Fuller Inc. 165 Valuation Allowance for Trading Investments 166 Valuation Allowance for Available-for-Sale Investments 181 Land 191 Store Equipment 192 Accumulated Depreciation-Store Equipment 193 Office Equipment 194 Accumulated Depreciation-Office Equipment LIABILITIES 210 Accounts Payable 221 Notes Payable 231 Interest Payable 241 Salaries Payable 251 Sales Tax Payable EQUITY 311 Common Stock 312 Paid-In Capital in Excess of Par-Common Stock 321 Preferred Stock 322 Paid-In Capital in Excess of Par-Preferred Stock 331 Treasury Stock 332 Paid-In Capital from Sale of Treasury Stock 340 Retained Earnings 350 Unrealized Gain (Loss) on Available-for-Sale Investments 351 Cash Dividends 352 Stock Dividends REVENUE 410 Sales 611 Interest Revenue 612 Dividend Revenue 631 Gain on Sale of Investments 641 Unrealized Gain on Trading Investments
Rios Co. is a regional insurance company that began operations on January 1, 20Y2. The following selected transactions relate to investments acquired by Rios Co., which has a fiscal year ending on December 31:
Record these transactions on page 10:
|
20Y2 |
|
|
|
Feb. |
1 |
Purchased 4,900 shares of Caldwell Inc. common stock at $35 per share plus a brokerage commission of $490. Caldwell has 100,000 shares of common stock outstanding. |
|
May |
1 |
Purchased securities of Holland Inc. as a trading investment for $84,798. |
|
July |
1 |
Sold 2,550 shares of Caldwell Inc. for $33 per share less a $95 brokerage commission. |
|
|
31 |
Received an annual dividend of $0.30 per share on 2,350 shares of Caldwell Inc. stock. |
|
Nov. |
15 |
Sold the remaining shares of Caldwell Inc. for $36 per share less a $75 brokerage commission. |
|
Dec. |
31 |
The trading securities of Holland Inc. have a fair value on December 31 of $77,865. |
Record these transactions on page 11:
|
20Y3 |
|
|
|
Apr. |
1 |
Purchased securities of Fuller Inc. as a trading investment for $125,040. |
|
Oct. |
14 |
Sold securities of Fuller Inc. that cost $25,008 for $26,850. |
|
Dec. |
31 |
The fair values of the Holland Inc. and Fuller Inc. securities are as follows: |
|
Issuing Company |
Cost |
Fair Value |
|
Holland Inc. |
$84,798 |
$184,830 |
|
Fuller Inc. |
100,032 |
79,620 |
|
|
Required: |
|
1. |
|
|
2. |
Prepare the Trading Investments section of the December 31, 20Y3, |
|
3. |
How are unrealized gains or losses on trading investments presented on the financial statements of Rios Co.? |
|
CHART OF ACCOUNTS |
|
|
Rios Co. |
|
|
General Ledger |
|
|
|
|
|
|
ASSETS |
|
110 |
Cash |
|
111 |
Petty Cash |
|
120 |
|
|
121 |
Allowance for Doubtful Accounts |
|
131 |
Notes Receivable |
|
132 |
Interest Receivable |
|
141 |
Merchandise Inventory |
|
145 |
Office Supplies |
|
146 |
Store Supplies |
|
151 |
Prepaid Insurance |
|
161 |
Investments-Caldwell Inc. Stock |
|
162 |
Trading Investments-Holland Inc. |
|
163 |
Trading Investments-Fuller Inc. |
|
165 |
Valuation Allowance for Trading Investments |
|
166 |
Valuation Allowance for Available-for-Sale Investments |
|
181 |
Land |
|
191 |
Store Equipment |
|
192 |
|
|
193 |
Office Equipment |
|
194 |
Accumulated Depreciation-Office Equipment |
|
|
LIABILITIES |
|
210 |
Accounts Payable |
|
221 |
Notes Payable |
|
231 |
Interest Payable |
|
241 |
Salaries Payable |
|
251 |
Sales Tax Payable |
|
|
EQUITY |
|
311 |
Common Stock |
|
312 |
Paid-In Capital in Excess of Par-Common Stock |
|
321 |
|
|
322 |
Paid-In Capital in Excess of Par-Preferred Stock |
|
331 |
|
|
332 |
Paid-In Capital from Sale of Treasury Stock |
|
340 |
|
|
350 |
Unrealized Gain (Loss) on Available-for-Sale Investments |
|
351 |
Cash Dividends |
|
352 |
Stock Dividends |
|
|
REVENUE |
|
410 |
Sales |
|
611 |
Interest Revenue |
|
612 |
Dividend Revenue |
|
631 |
Gain on Sale of Investments |
|
641 |
Unrealized Gain on Trading Investments |
|
|
EXPENSES |
|
511 |
Cost of Merchandise Sold |
|
512 |
Bad Debt Expense |
|
515 |
Credit Card Expense |
|
516 |
Cash Short and Over |
|
520 |
Salaries Expense |
|
531 |
Advertising Expense |
|
532 |
Delivery Expense |
|
533 |
Repairs Expense |
|
534 |
Selling Expenses |
|
535 |
Rent Expense |
|
536 |
Insurance Expense |
|
537 |
Office Supplies Expense |
|
538 |
Store Supplies Expense |
|
561 |
Depreciation Expense-Store Equipment |
|
562 |
Depreciation Expense-Office Equipment |
|
590 |
Miscellaneous Expense |
|
710 |
Interest Expense |
|
731 |
Loss on Sale of Investments |
|
741 |
Unrealized Loss on Trading Investments |
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Labels |
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Current assets |
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Current liabilities |
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December 31, 20Y3 |
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Amount Descriptions |
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Net income |
|
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Net loss |
|
|
Other income (loss) |
|
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Other comprehensive income (loss) |
|
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Trading investments (at cost) |
|
|
Trading investments (at fair value) |
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A journal entry is a form of accounting entry that is used to report a business transaction in a company's accounting records.
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