Cornerstones of Financial Accounting
4th Edition
ISBN: 9781337690881
Author: Jay Rich, Jeff Jones
Publisher: Cengage Learning
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Chapter A2, Problem 18E
Trading Securities
Pear Investments began operations in 2020 and invests in securities classified as trading securities. During 2020, it entered into the following trading security transactions:
Purchased 20,000 shares of ABC common stock at $38 per share Purchased 32,000 shares of XYZ common stock at $17 per share
At December 31, 2020, ABC common stock was trading at $39.50 per share and XYZ common stock was trading at $16.50 per share.
Required:
1. Prepare the necessary
2. CONCEPTUAL CONNECTION What is the income statement effect of this adjusting entry?
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Akers Company invests its excess cash in marketable securities. At the beginning of 2019, it had the following portfolio of investments in trading debt securities:
SecurityPar ValueAmortized Cost12/31/18 Fair ValueIvan Company 5% bonds, maturing on Dec. 31, 2028$10,000$8,400$9,400Taylor Company 6% bonds, maturing on Dec. 31, 2023$40,000$43,200$41,800Totals$51,600$51,200During 2019, the following transactions occurred:
Mar. 31Purchased Hill Company 8% bonds with a face value of $20,000 for $20,000 plus accrued interest; interest is payable on the bonds each June 30 and December 31.Mar. 31Sold the Taylor Company investment for $42,000 plus accrued interest. The Taylor bonds pay interest on December 31 of each year.June 30Received the semiannual interest on the Hill Company bonds.Dec. 31Received the annual interest on the Ivan Company bonds and the semiannual interest on the Hill Company bonds.The December 31 closing market prices were as follows: Ivan Company bonds, $9,000;…
On January 1, 2020, A Corp. had the following investments:
Classification
Investment
MarketValue
MaturityValue
Cost
Trading
K Inc. bonds
$1,900
$1,800
Trading
S Co. bonds
3,100
3,000
Held-to-maturity
G Inc. bonds (due 12/31/2022)
$10,000
9,700
During the year, A Corp. acquired M Co. bonds for $1,000 and classified it as trading. At year-end, the M Co. bonds have fair market value of $1,200. The K Inc. investment on December 31 had a fair market value of $2,500. The S Co. investment had a December 31 market value of $3,500, and the G Inc. bonds had a December 31 market value of $9,850.
Required:
Indicate the balance sheet classification and where unrealized holding gains/losses would appear on the December 31, 2020 financial statements for each investment.
Classification
Balance SheetValuation
: Trading Securities (at fair value)
$fill in the blank 2
: Held-to-maturity (amortized cost)
$fill in the blank 4
On January 1, 2020, A Corp. had the following investments:
Classification
Investment
MarketValue
MaturityValue
Cost
Trading
K Inc. bonds
$1,900
$1,800
Trading
S Co. bonds
3,100
3,000
Held-to-maturity
G Inc. bonds (due 12/31/2022)
$10,000
9,700
During the year, A Corp. acquired M Co. bonds for $1,000 and classified it as trading. At year-end, the M Co. bonds have fair market value of $1,200. The K Inc. investment on December 31 had a fair market value of $2,500. The S Co. investment had a December 31 market value of $3,500, and the G Inc. bonds had a December 31 market value of $9,850.
Required:
Indicate the balance sheet classification and where unrealized holding gains/losses would appear on the December 31, 2020 financial statements for each investment.
Chapter A2 Solutions
Cornerstones of Financial Accounting
Ch. A2 - How do long-term investments differ from...Ch. A2 - Prob. 2DQCh. A2 - Prob. 3DQCh. A2 - Prob. 4DQCh. A2 - Prob. 5DQCh. A2 - Prob. 6DQCh. A2 - Prob. 7DQCh. A2 - How does the equity method discourage the...Ch. A2 - Prob. 9DQCh. A2 - Prob. 10DQ
Ch. A2 - Prob. 11DQCh. A2 - Prob. 12DQCh. A2 - Prob. 13DQCh. A2 - Prob. 14DQCh. A2 - Prob. 15DQCh. A2 - Prob. 1MCQCh. A2 - Prob. 2MCQCh. A2 - Prob. 3MCQCh. A2 - Prob. 4MCQCh. A2 - Prob. 5MCQCh. A2 - Prob. 6MCQCh. A2 - Prob. 7MCQCh. A2 - Prob. 8MCQCh. A2 - Prob. 9MCQCh. A2 - Prob. 10MCQCh. A2 - Prob. 11MCQCh. A2 - When the market value of a companys...Ch. A2 - Prob. 13MCQCh. A2 - Prob. 14MCQCh. A2 - Prob. 15MCQCh. A2 - Prob. 16MCQCh. A2 - Prob. 17ECh. A2 - Trading Securities Pear Investments began...Ch. A2 - Prob. 19ECh. A2 - Prob. 20ECh. A2 - Adjusting the Allowance to Adjust Trading...Ch. A2 - Prob. 22ECh. A2 - Prob. 23ECh. A2 - Prob. 24ECh. A2 - Prob. 25ECh. A2 - Prob. 26ECh. A2 - Prob. 27ECh. A2 - Prob. 28ECh. A2 - Prob. 29ECh. A2 - Prob. 30E
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