In January 2017, the management of Kinzie Company concludes that it has sufficient cash to permit some short-term investments in debt and stock securities. During the year, the following transactions occurred.
Feb. 1 Purchased 400 shares of Muninger common stock for $22,000.
Mar. 1 Purchased 600 shares of Tatman common stock for $15,000.
Apr. 1 Purchased 50 $1,070, 8% Yoakem bonds for $53,500. Interest is payable semiannually on April 1 and October 1.
July 1 Received a cash dividend of $0.60 per share on the Muninger common stock.
Aug. 1 Sold 133 shares of Muninger common stock at $60 per share.
Sept. 1 Received a $1 per share cash dividend on the Tatman common stock.
Oct. 1 Received the semiannual interest on the Yoakem bonds.
Oct. 1 Sold the Yoakem bonds for $52,500.
At December 31, the fair value of the Muninger common stock was $56 per share. The fair value of the Tatman common stock was $24 per share. Journalize the transactions and post to the accounts Debt Investments and Stock Investments. (Use T-account.) (Record journal entries in the order presented in the problem. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)
Prepare the adjusting entry at December 31, 2017, to report the investment securities at fair value. All securities are considered to be trading securities. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)
Show the balance sheet presentation of investment securities at December 31, 2017. (Round answer to 0 decimal places, e.g. 5,275.)
Give the statement classification of each income statement account.
Stock Investment and Debt Investment:
Most of the investments are divided into two parts Stock Investment and Debt Investment."Stock Investment" is the investment made in equity stock or shares and "debt investment" is the investment made in bonds,mortgages and fixed income securities.
Answer and Explanation:
a)Following are the Journal entries and ledger accounts of Debt Investments and Stock Investments. (in T-account.)
See full answer below.
Learn more about this topic:
from Intro to Business: Help and ReviewChapter 25 / Lesson 16