
1.
Record the transactions in the books of Corporation P for the first quarter of 2019.
1.

Explanation of Solution
Investment: It refers to the process of using the currently held excess cash to earn profitable returns in future. The investments can be made in equity securities such as shares or debt securities such as bonds.
Record the transactions in the books of Corporation P for the first quarter of 2019.
Date | Account Title and Explanation | Debit | Credit |
January 1, 2019 | Investment in equity securities | $11,500 | |
Cash (1) | $11,500 | ||
(To record the purchase of available-for-sale securities) | |||
February 1, 2019 | Investment in available-for-sale securities | $32,000 | |
Interest income (2) | $1,400 | ||
Cash | $33,400 | ||
(To record the purchase of available-for-sale securities) | |||
February 1, 2019 | Petty Cash | $500 | |
Cash | $500 | ||
(To record the establishment of petty cash fund) | |||
February 28, 2019 | Cash | $1,200 | |
Interest income (3) | $1,200 | ||
(To record the receipt of semi-annual interest from Company A) | |||
February 28, 2019 | Postage expense | $110.00 | |
Office Supplies expense | $170.65 | ||
Transportation expense | $45.00 | ||
Miscellaneous expense | $43.50 | ||
Cash short and over (4) | $5.35 | ||
Interest income | $374.50 | ||
(To record the replenishment of fund) | |||
March 31, 2019 | Cash | $2,100 | |
Interest receivable (5) | $200 | ||
Dividend income | $1,500 | ||
Interest income (6) | $800 | ||
(To record the interest income, dividend income, and interest receivable) | |||
March 31, 2019 | Unrealized holding gain or loss: Equity securities | $1,300 | |
Investment in equity securities | $1,300 | ||
(To record the unrealized holding loss on investment) | |||
March 31, 2019 | Allowance for change in fair value of investment | $400.00 | |
Unrealized holding gain/loss: Available for sale securities | $400.00 | ||
To record the allowance for change in fair value of investment) | |||
March 31, 2019 | Postage expense | $140.00 | |
Office Supplies expense | $75.30 | ||
Miscellaneous expense | $54.20 | ||
Cash | $269.50 | ||
(To record the replenishment of fund) |
Table (1)
Working note (1):
Calculate the investment in available-for-sale security.
Working note (2):
Calculate the amount of interest income paid by Corporation P.
Working note (3):
Calculate the amount of interest income.
Working note (4):
Calculate the amount of cash short and over.
Working note (5):
Calculate the amount of accrued interest on Company A’s bond.
Working note (6):
Calculate the amount of interest income.
2.
Prepare bank reconciliation for Corporation P for March 31, 2019.
2.

Explanation of Solution
Prepare bank reconciliation for Corporation P for March 31, 2019.
Corporation P | ||
Bank reconciliation | ||
March 31, 2019 | ||
Particulars | Amount | Amount |
Balance per bank statement | $13,459.75 | |
Add: Deposit in transit | $2,100.00 | |
$15,559.75 | ||
Less: Outstanding checks | ($2,365.40) | |
Adjusted cash balance | $13,194.35 | |
Balance per company records | $11,689.95 | |
Add: Note collected by bank | $1,500.00 | |
Interest on note | 100 | $1,600.00 |
$13,289.95 | ||
Less: Bank service charge | 20.00 | |
NSF check returned | 75.6 | ($95.60) |
Adjusted cash balance | $13,194.35 |
Table (2)
3.
Record the
3.

Explanation of Solution
Record the journal entry to adjust the Corporation P’s books on March 31, 2019.
Date | Account Title and Explanation | Debit | Credit |
March 31, 2019 | Cash | $1,600 | |
Notes receivable | $1,500 | ||
Interest income | $100 | ||
(To adjust the cash balance in company records to recognize the income received in bank account) | |||
March 31, 2019 | Miscellaneous expense | $20.00 | |
Accounts receivable | $75.60 | ||
Cash | $95.60 | ||
(To adjust the cash balance in company records to recognize the expense and receivable) |
Table (3)
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Intermediate Accounting: Reporting and Analysis - With Access
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