Assessing Financial Statement Effects of Trading and Available-for-Sale SecuritiesUse the financial statement effects template to record the following four transactions involving investments in marketable securities.Use negative signs with your answers, when appropriate.Balance SheetTransaction Cash Asset +(1)(2)1. Purchased 6,000 common shares of Liu, Inc., at $11.50 cash per share.2. Received a cash dividend of $1.40 per common share from Liu.3. Year-end market price of Liu common stock is $11.25 per share.4. Sold all 6,000 common shares of Liu for $66,300.(3)TNoncashAssets= Liabilities +ContributedCapital+EarnedCapitalRevenueIncome StatementExpensesNetIncome

The accounting equation states that the total assets will equal the sum of liabilities and shareholders' capital. This equation forms the basis of the accounting system and can be used to check if there are any discrepancies while preparing the financial statements. The double-entry accounting system ensures that every transaction is recorded in two debit and credit entries. It means that each debit has a corresponding credit entry. Thus, every transaction will ultimately affect the assets and the liabilities. The double-entry accounting system is the reason why a balance sheet always balances.(1) Calculation of purchase price of common shares :Purchase price = 6,000 x $11.50 = $69,000(2) Calculation of cash dividend received :The cash dividend received = 6,000 x $1.40 = $8,400(3) Calculation of revenues :Revenues = 6,000 x ($11.50 - $11.25) = $1,500(4) Calculation of loss on sale of shares :Loss on sale = $66,300 - ($69,000 + $1,500) = $4,200 Final Answer Balance sheetTransactionCash Asset+Non cash asset=Liabilities+Contributed capital+Earned capital1-$69,000+$69,000=0+0+02$8,400 +0=0+0+$8,40030+$1,500=0+0+$1,5004$66,300+-$70,500=0+0+-$4,200Total$5,700+$0=0+0+$5,700Income statementTransactionRevenue-Expenses=Net Income1NA-NA=NA2$8,400-0=$8,4003$1,500-0=$1,5004$0-$4,200=-$4,200Total$9,900-$4,200=$5,700

Business

Accounting

Use the financial statement effects template to record the following four tra 1. Purchased 6,000 common shares of Liu, Inc., at $11.50 cash per share. 2. Received a cash dividend of $1.40 per common share from Liu. 3. Year-end market price of Liu common stock is $11.25 per share. 4. Sold all 6,000 common shares of Liu for $66,300.

Use the financial statement effects template to record the following four tra 1. Purchased 6,000 common shares of Liu, Inc., at $11.50 cash per share. 2. Received a cash dividend of $1.40 per common share from Liu. 3. Year-end market price of Liu common stock is $11.25 per share. 4. Sold all 6,000 common shares of Liu for $66,300.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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