Chapter 10, Problem 10.21BP

Classifying and accounting for stock investments

Ship Your Way Corporation generated excess cash and invested in securities as follows:

2016

Jul. 2    Purchased 3,600 shares of TJF, Inc. common stock at $11 .00 per share. Ship Your Way holds the stock in its active trading account and plans to sell the stock within three months, when the company will need the cash for normal operations.

Aug. 21	Received a cash dividend of $0.1 0 per share on t he TJF stock investment.
Sep. 16	Sold the TJF stock for $15.10 per share.
Oct. 8	Purchased 400 shares of Seanco stock at $13.00 per share. The stock is held in the active trading account as Ship Your Way plans to hold the Seanco stock for less than five months.
Dec. 31	Seanco stock's current market price is $6.00 per share.

Requirements

1. Classify each of the investments made during 2016. (Assume the investments represent less than 20% of ownership of outstanding voting stock.)

2. Journalize the 2016 transactions. Explanations are not required.

3. Prepare T-accounts for the investment assets, and show how to report the investments on Ship Your Way's balance sheet at December 31, 2016.