Explanation Introduction: Available-for-sale (AFS) securities are securities/shares which are purchased to earn dividend, interest or to increase the fair market value. When these securities are sold in short term, they become short term investments else they are considered as long term investments. To determine: 1. Journal entries to record the preceding transaction and events. 2. A table for comparing the year-end cost and fair values of Rose’s short-term investments in available-for sale securities. 3. Adjusting entry for recording the year-end fair value adjustment for the portfolio of short-term investments in available-for sale securities. 4. Balance sheet showing the fair value adjustment for short-term investments of Rose 5. Show the effect of short term investment on (a) income statement for the year 2015 and (b) equity section of its balance sheet at the yearend 2015. Solution: 1. The required journal entries and adjustment entries are shown in the explanation section. 2. The table is shown in the explanation section. 3. The adjustment entry is mentioned in the explanation section. 4. Balance sheet presentation of the fair value adjustment for Rose’s short-term investment is shown in the explanation section. 5. The net effect is shown in the explanation section. Explanation: 1. The required journal entries and adjustment entries are as follows: Entries to record purchase of shares: Date Particulars Debit($) Credit($) 16.04.2015 STI- Trading (G Company) 97180 Cash (To record shares purchased) 97180 01.05.2015 STI-Trading(T-Bills) 100000 Cash (To record shares purchased) 100000 07.07.2015 STI-Trading(P Company) 98675 Cash (To record shares purchased) 98675 20.07.2015 STI-Trading(X Company) 16955 Working notes: Calculation of Purchases: We use the formula mentioned below: P u r c h a s e s = ( N u m b e r o f s h a r e s * P r i c e / U n i t ) + C o m m i s i o n Date Number of Shares Price per unit Commission Purchases 16.04.2015 4000 $24.25 $180 $97180 07.07.2015 2000 $49.25 $175 $98675 20.07.2015 1000 $16.75 $205 $16955 Entries to record cash received for investment: Date Particulars Debit($) Credit($) 03.08.2015 Cash 101500 Short term investment (T Bills) 100000 Interest (Cash received from investment) 1500 Calculation of interest received: I n t e r e s t = A m o u n t * R a t e * T i m e p e r i o d = $ 100000 * 0.06 * 13 w e e k s 52 w e e k s = $ 1500 Entries to record dividend received for investment: Date Particulars Debit($) Credit($) 15.08.2015 Cash 3400 Dividend (Dividend received) 3400 01.10.2015 Cash 3800 Dividend (Dividend received) 3800 31.12.2015 Cash 2600 Dividend (Dividend received) 2600 D i v i d e n d = A m o u n t * R a t e =$4000*0.85=$3400 =$2000*$1.30=$3800 =$2000*$1.30=$2600 Entries to record Sale of shares: Date Particulars Debit($) Credit($) 28.08.2015 Cash 59775 Gain on sale of Short term investment (STI) 11185 STI − Trading (G Company) (Entry for sales of shares) 48590 2. Preparation of Cost and Fair value for Rose’s AFS portfolio: Particulars Cost($) Fair Value($) Unrealized Gain/Loss G

WORKING PAPERS F/ FUND ACCOUNTING

22nd Edition

ISBN: 9781308868394

Author: Wild

Publisher: MCG CUSTOM

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Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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WORKING PAPERS F/ FUND ACCOUNTING

Ch. 15 - Prob. 1DQ Ch. 15 - Prob. 2DQ Ch. 15 - Prob. 3DQ Ch. 15 - Prob. 4DQ Ch. 15 - Prob. 5DQ Ch. 15 - Prob. 6DQ Ch. 15 - Prob. 7DQ Ch. 15 - Prob. 8DQ Ch. 15 - Prob. 9DQ Ch. 15 - Prob. 10DQ

Ch. 15 - Prob. 11DQ Ch. 15 - Prob. 12DQ Ch. 15 - Prob. 13DQ Ch. 15 - Prob. 14DQ Ch. 15 - Prob. 15DQ Ch. 15 - Prob. 16DQ Ch. 15 - Prob. 17DQ Ch. 15 - Prob. 1QS Ch. 15 - Prob. 2QS Ch. 15 - Prob. 3QS Ch. 15 - Prob. 4QS Ch. 15 - Prob. 5QS Ch. 15 - Prob. 6QS Ch. 15 - Prob. 7QS Ch. 15 - Prob. 8QS Ch. 15 - Prob. 9QS Ch. 15 - Prob. 10QS Ch. 15 - Prob. 11QS Ch. 15 - Prob. 12QS Ch. 15 - Prob. 13QS Ch. 15 - Prob. 14QS Ch. 15 - Prob. 15QS Ch. 15 - Prob. 16QS Ch. 15 - Prob. 17QS Ch. 15 - Prob. 18QS Ch. 15 - Exercise 15-1 Debt and equity securities and shod-...Ch. 15 - Prob. 2E Ch. 15 - Brooks Co. purchases various investments in...Ch. 15 - Prob. 4E Ch. 15 - Prob. 5E Ch. 15 - Prob. 6E Ch. 15 - Prob. 7E Ch. 15 - Prob. 8E Ch. 15 - Prob. 9E Ch. 15 - Prob. 10E Ch. 15 - Prob. 11E Ch. 15 - Prob. 12E Ch. 15 - Prob. 13E Ch. 15 - Prob. 14E Ch. 15 - Prob. 15E Ch. 15 - Prob. 16E Ch. 15 - Prob. 17E Ch. 15 - Prob. 1APSA Ch. 15 - Prob. 2APSA Ch. 15 - Prob. 3APSA Ch. 15 - Prob. 4APSA Ch. 15 - Prob. 5APSA Ch. 15 - Prob. 6APSA Ch. 15 - Prob. 1BPSB Ch. 15 - Prob. 2BPSB Ch. 15 - Prob. 3BPSB Ch. 15 - Prob. 4BPSB Ch. 15 - Prob. 5BPSB Ch. 15 - Prob. 6BPSB Ch. 15 - Prob. 15SP Ch. 15 - Prob. 1GLP Ch. 15 - Prob. 2GLP Ch. 15 - Prob. 1BTN Ch. 15 - Prob. 2BTN Ch. 15 - Kasey Hartman is the controller for Wholemart...Ch. 15 - Prob. 4BTN Ch. 15 - Prob. 5BTN Ch. 15 - Prob. 6BTN Ch. 15 - Prob. 7BTN Ch. 15 - Prob. 8BTN Ch. 15 - Prob. 9BTN

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