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?
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
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
of short-term stock investments.
Analysis Component
4. Explain the
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?
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 8 images
