Concept introduction: Investment should be classified between current and non-current assets on the basis of motive of investment. Some securities may be purchased for trading purpose or for held-to-maturity, so disclosure of each type of securities will be different.
Requirement 1;
Classification of stock investment.
Main solution:
1. 3600 shares of TJF Inc. will be classified as Marketable Securities – Held as Trading Securities
2. 400 shares of Seanco will be classified as Marketable Securities – Held as Trading Securities
Requirement 2;
To prepare:
Main solution:
Date | Accounts Title | Debit | Credit |
---|---|---|---|
July2, 2016 | Marketable Securities | $39600 | |
Cash | $39600 | ||
Aug. 21, 2016 | Cash | $360 | |
Dividend Revenue | $360 | ||
Sep. 16, 201 | Cash | $54360 | |
Marketable Securities | $39600 | ||
Realized Gain on Trading Securities | $14760 | ||
Oct. 8, 2016 | Marketable Securities | $5200 | |
Cash | $5200 | ||
Dec.31, 2016 | Unrealized Holding Loss on Trading Securities | $2800 | |
Marketable Securities | $2800 |
Requirement 3;
To prepare: Preparation of T account and disclosure in the balance sheet at December 31, 2016.
Main solution:
Marketable Securities (Investment made in TJF Inc.) | |||
---|---|---|---|
Debit | Credit | ||
July 2, 2016 | $39600 | Sept. 16, 2016 | $39600 |
$37400 | $37400 |
Marketable Securities (Investment made in Seanco Inc.) | |||
---|---|---|---|
Debit | Credit | ||
Oct. 8, 2016 | $5200 | Dec. 31, 2016 | $2800 |
Ending balance | $2400 |
Way Corporation | |
---|---|
Balance Sheet (Partial) | |
As at December 31, 2016 | |
Assets | |
Current asset; | |
Marketable Securities – Held as trading securities | $2400 |
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ACCOUNTING PRINCIPLES 122 5/16 >C<
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