Financial Accounting
9th Edition
ISBN: 9781259738692
Author: Libby
Publisher: MCG
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Chapter A, Problem 4ME
To determine
Journalize the entries related to investment in trading securities.
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Use the following information on a company’s investments in equity securities to answer questions 1- 2 below.
The company’s accounting year ends December 31.
Investment
Date of acquisition
Cost
Fair value
12/31/16
Date sold
Selling price
Ajax Company stock
6/20/16
$40,000
$35,000
2/10/17
$32,000
Bril Corporation stock
5/1/16
20,000
N/A
11/15/16
26,000
Coy Company stock
8/2/16
16,000
16,500
1/17/17
23,000
1. If the above investments are categorized as trading securities, what amount is reported for gain or loss on securities, on the 2016 income statement?
2. If the above investments are categorized as trading securities, what amount is reported for gain or loss on securities, on the 2017 income statement?
Fair value journal entries, trading investmentsThe investments of Charger Inc. include a single investment: 14,500shares of Raiders Inc. common stock purchased on February 24, Year 1,for $38 per share including brokerage commission. These shares werelassified as trading securities. As of the December 31, Year 1, balancesheet date, the share price had increased to $42 per share.
a. Journalize the entries to acquire the investment on February 24 andrecord the adjustment to fair value on December 31, Year 1.b. How is the unrealized gain or loss for trading investments reported onthe financial statements?
Question:
For the following transactions
involving investments in marketable
securities assess the financial
statement effects of trading and of
available-for-sale securities.
(Assume that investments are
classified as trading.)
(1) Ohlson Co. purchases 5,200 common
shares of Freeman Co. at $16 cash per
share.
(2) Ohlson Co. receives a cash dividend
of $1.25 per common share from
Freeman.
(3) Year-end market price of Freeman
common stock is $17.5 per share.
Chapter A Solutions
Financial Accounting
Ch. A - Prob. 1QCh. A - Explain the difference in accounting methods used...Ch. A - Explain how bonds held to maturity are reported on...Ch. A - Explain the application of the cost principle to...Ch. A - Under the fair value method, when and how does the...Ch. A - Under the equity method, why does the investor...Ch. A - Prob. 7QCh. A - Prob. 8QCh. A - Prob. 9QCh. A - Company X owns 40 percent of Company Y and...
Ch. A - Prob. 2MCQCh. A - Dividends received from stock that is reported as...Ch. A - Prob. 4MCQCh. A - Prob. 5MCQCh. A - When using the equity method of accounting, when...Ch. A - Prob. 7MCQCh. A - Prob. 8MCQCh. A - Which of the following is true regarding the...Ch. A - Prob. 10MCQCh. A - Matching Measurement and Reporting Methods Match...Ch. A - Prob. 2MECh. A - Prob. 3MECh. A - Prob. 4MECh. A - Prob. 5MECh. A - Prob. 6MECh. A - Prob. 7MECh. A - Prob. 8MECh. A - Prob. 9MECh. A - Prob. 10MECh. A - Prob. 11MECh. A - Prob. 1ECh. A - Prob. 2ECh. A - Recording Transactions in the Available-for-Sale...Ch. A - Prob. 4ECh. A - Prob. 5ECh. A - Reporting Gains and Losses in the Trading...Ch. A - Prob. 7ECh. A - Prob. 8ECh. A - Prob. 9ECh. A - Prob. 10ECh. A - Prob. 11ECh. A - Prob. 1PCh. A - Prob. 2PCh. A - Prob. 3PCh. A - Prob. 4PCh. A - Prob. 5PCh. A - Comparing Methods to Account for Various Levels of...Ch. A - Prob. 7PCh. A - Recording Investments for Significant Influence LO...Ch. A - Prob. 9PCh. A - Prob. 10PCh. A - Prob. 11PCh. A - Prob. 1APCh. A - Prob. 2APCh. A - Reporting Passive Investments During January 2017,...Ch. A - Prob. 4APCh. A - Prob. 5APCh. A - Prob. 6APCh. A - Prob. 1CONCh. A - Finding Financial Information Refer to the...Ch. A - Prob. 2CPCh. A - Prob. 3CPCh. A - Prob. 4CPCh. A - Prob. 5CPCh. A - Prob. 6CP
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- During 2021, Anthony Company purchased debt securities as a long-term investment and classified them as trading. All securities were purchased at par value. Pertinent data are as follows: The net holding gain or loss included in Anthonys income statement for the year should be: a. 0 b. 3,000 gain c. 9,000 loss d. 12,000 lossarrow_forwardHow do I solve thisarrow_forwardOn January I of Year 1, Steve Company purchased the following securities. Security Type Classification Cost Bond Trading $5,000 B Stock Trading 27,500 Stock Available for sale $10,000 D Bond Available for sale 17,000 E Stock Available for sale 9,200 Steve Company sold all of its investment in Security D for $8,900 on October 31 of Year 1. On December 31 of Year 1, the following fair values were available for Securities A.BC, and E (with Security D having been sold on October 31). Security Type Classification Cost Market Value (end Year 1) A Bond Trading 55,000 $3,200 Stock Trading 27,500 36,700 Stock Available for sale s10,000 $14,000 Stock Available for sale 9,200 6,000 Compute the TOTAL. amount of net UNrealized gain or loss that will be reported in Steve Company's OTHER COMPREHENSIVE INCOME for Year 1. Net gain $8,200 Net gain of $6,000 Net gain $9.000 O Net gain of $7,400 Net gain of $800 FEEDBACK 0/1 (0.0%)arrow_forward
- Can you please help me solve this question?arrow_forwardThe investments of Charger Inc. include a single investment: 14,500 shares of Raiders Inc. common stock purchased on February 24, Year 1, for $38 per share including brokerage commission. These shares were classified as trading securities. As of the December 31,Year 1, balance sheet date, the share price had increased to $42 per share.a. Journalize the entries to acquire the investment on February 24 and record the adjustment to fair value on December 31, Year 1.b. How is the unrealized gain or loss for trading investments reported on the financial statements?arrow_forwardPresented below are selected transactions regarding investment for Cardinal Paz Corp. Cardinal Paz Corp. classified these investments as trading. Feb. 1, 2022 Purchased Sharapova Company ordinary shares, $100 par, 200 shares at a purchase price $37,600. April 1 Purchased government bond, 11 percent, due April 1, 2028, interest payable April 1 and October 1, 110 bonds of $1,000 par each (Assume: par bond) July 1 McGrath Company 12 percent bonds, par $50,000, dated March 1, 2022 purchased at $52,000, interest payable annually on March 1, due March 1, 2042. The fair value of the investment on December 31, 2022 were: Sharapova Company $31,800 Government bonds 124,700 McGrath Company bonds 58,600 Instructions a. Prepare journal entries that should be made in 2022 to record the purchase of these investments. b. Prepare journal entries to record the accrued interest on December 31, 2022 (Please ignore the amortization of premium) c. At the end of 2022, what entries (if any) would…arrow_forward
- Fair Value Journal Entries, Available-for-Sale Investments The investments of Steelers Inc. include a single investment: 8,100 shares of Bengals Inc. common stock purchased on September 12, Year 1, for $13 per share including brokerage commission. These shares were classified as available-for-sale securities. As of the December 31, Year 1, balance sheet date, the share price declined to $10 per share. CashCash DividendsInterest ReceivableInvestments-Bengals Inc. StockRetained EarningsUnrealized Gain (Loss) on Available-for-Sale InvestmentsValuation Allowance for Available-for-Sale Investme a. Journalize the entries to acquire the investment on September 12 and record the adjustment to fair value on December 31, Year 1. Year 1 Sept. 12 fill in the blank fb2219094fa204f_2fill in the blank fb2219094fa204f_4Year 1 Dec. 31 fill in the blank fb2219094fa204f_6fill in the blank fb2219094fa204f_8b. How is the unrealized gain or loss for available-for-sale investments disclosed on the financial…arrow_forwardI need proper answer to this questionarrow_forward1. Record, in journal entry form, the following transactions, assuming the company plans on holding the investments for trading purposes: April 16 - Purchased 300 shares of Ameco for $25 per share. • May 2 - Purchased 1,000 shares of Rattle Inc. for $12.50 per share. • June 19 - Sold 100 Ameco shares for $32.75 per share. • October 7 - Purchased 550 shares of BMC for $27.80 per share. • November 30 - Received a dividend of $0.25 per share from Rattle. • December 12 - Sold half the shares in BMC for $21.00 per share. 2. Record any required journal entries on December 31, the company's year-end.arrow_forward
- Journal entries for trading investments The investments of Charger Inc. include an investment of trading securities of Raiders Inc. purchased on February 24, 20Y7, for $551,000. The fair value of the securities on December 31, 20Y7, is $609,000. a. Journalize the entries for the February 24 purchase and the adjustment to fair value on December 31, 20Y7. If an amount box does not require an entry, leave it blank. 20Y7 Feb. 24 fill in the blank fill in the blank fill in the blank fill in the blank 20Y7 Dec. 31 fill in the blank fill in the blank fill in the blank fill in the blank b. How is a unrealized gain or loss for trading investments reported on the financial statements? The unrealized gain or unrealized loss on trading investments is reported on the_____________(or a separate item if significant). Unrealized losses would be_____________in determining net income, while unrealized gains would be_____________in determining net income..…arrow_forwardJournal entries for trading investments The investments of Charger Inc. include an investment of trading securities of Raiders Inc. purchased on February 24, 20Y7, for $551,000. The fair value of the securities on December 31, 20Y7, is $609,000. a. Journalize the entries for the February 24 purchase and the adjustment to fair value on December 31, 20Y7. If an amount box does not require an entry, leave it blank. 20Y7 Feb. 24 fill in the blank 3edf1609201706b_2 fill in the blank 3edf1609201706b_3 fill in the blank 3edf1609201706b_5 fill in the blank 3edf1609201706b_6 20Y7 Dec. 31 fill in the blank 3edf1609201706b_8 fill in the blank 3edf1609201706b_9 fill in the blank 3edf1609201706b_11 fill in the blank 3edf1609201706b_12 b. How is a unrealized gain or loss for trading investments reported on the financial statements? The unrealized gain or unrealized loss on trading investments is reported on the (or a separate item if significant).…arrow_forwardDo not give answer in imagearrow_forward
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