Slip Systems had no short-term investments prior to this year. It had the following transactions this year involving short-term stock investments with insignificant influence. Feb. 6 Purchased 3,400 shares of Nokia stock at $41 per share. Apr. 7 Purchased 1,200 shares of Dell stock at $39 per share. June 2 Purchased 2,500 shares of Merck stock at $72 per share. 30 Received a $1.00 per share cash dividend on the Nokia shares. Aug. 11 Sold 850 shares of Nokia stock at $46 per share. 24 Received a $0.10 per share cash dividend on the Dell shares. Nov. 9 Received a $1.50 per share cash dividend on the remaining Nokia shares. Dec. 18 Received a $0.15 per share cash dividend on the Dell shares. Required 1. Prepare journal entries to record the preceding transactions and events. 2. Prepare a table to compare the year-end cost and fair values of the short-term stock investments. The year-end fair values per share are Nokia, $40; Dell, $41; and Merck, $59. 3. Prepare an adjusting entry, if necessary, to record the year-end fair value adjustment for the portfolio of short-term stock investments. Analysis Component 4. Explain the balance sheet presentation of the fair value adjustment to Slip’s short-term investments. 5. How do these short-term stock investments affect (a) its income statement this year and (b) the equity section of its balance sheet at this year-end?

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter2: Basic Accounting Systems: Cash Basis

Section: Chapter Questions

Problem 10CDQ: Assume that as of January 1, 20Y8, Sylvester Con- suiting has total assets of $500,000 and total...

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Slip Systems had no short-term investments prior to this year. It had the following transactions this year
involving short-term stock investments with insignificant influence.
Feb. 6 Purchased 3,400 shares of Nokia stock at $41 per share.
Apr. 7 Purchased 1,200 shares of Dell stock at $39 per share.
June 2 Purchased 2,500 shares of Merck stock at $72 per share.
30 Received a $1.00 per share cash dividend on the Nokia shares.
Aug. 11 Sold 850 shares of Nokia stock at $46 per share.
24 Received a $0.10 per share cash dividend on the Dell shares.
Nov. 9 Received a $1.50 per share cash dividend on the remaining Nokia shares.
Dec. 18 Received a $0.15 per share cash dividend on the Dell shares.
Required
1. Prepare journal entries to record the preceding transactions and events.
2. Prepare a table to compare the year-end cost and fair values of the short-term stock investments. The
year-end fair values per share are Nokia, $40; Dell, $41; and Merck, $59.
3. Prepare an adjusting entry, if necessary, to record the year-end fair value adjustment for the portfolio
of short-term stock investments.
Analysis Component
4. Explain the balance sheet presentation of the fair value adjustment to Slip’s short-term investments.
5. How do these short-term stock investments affect (a) its income statement this year and (b) the equity
section of its balance sheet at this year-end?

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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