Chapter 12, Problem 12.5AP

(a)

To determine

Stock investments: Stock investments are equity securities which claim ownership in the investee company and pay a dividend revenue to the investor company.

Available-for-sale securities: These are short-term or long-term investments in debt and equity securities with an intention of holding the investment for some strategic purposes like meeting liquidity needs, or manage interest risk.

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

• Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.

• Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

To journalize: The stock investment transactions in the books of Company F.

(b)

To determine

To post: The entries to stock investment account.

(c)

To determine

To journalize: The adjusting entry related to portfolio of securities as at December 31, 2016.

(d)

To determine

To show: The balance sheet representation of available-for-sale securities