Recording and Valuing Trading Securities Myers & Associates reports the followin
ID: 2397004 • Letter: R
Question
Recording and Valuing Trading Securities
Myers & Associates reports the following information on its December 31, 2011, balance sheet:
Supporting records of Myers' trading securities portfolio show the following debt and equity securities:
Interest dates on the treasury bonds are January 1 and July 1. Myers & Associates uses the revenue approach to record the purchase of bonds with accrued interest. During 2012 and 2013, Myers & Associates completed the following transactions related to trading securities:
1. Prepare journal entries for the preceding transactions and to accrue interest on December 31, 2012. Ignore any amortization of premium or discount on U.S. Treasury bonds. Round your answers to the nearest dollar. For compound transactions, if an amount box does not require an entry, leave it blank.
2012, Jan. 1
Apr. 1
To record sale of 7 1/2% Treasury bonds.
May 21
To record receipt of Conway Co. common dividend.
July 1
To record receipt of interest on U.S. Treasury bonds.
July 1
To record sale of 7% U.S. Treasury bonds.
Aug. 15
To record purchase of Nieman Inc. common stock.
Nov. 1
To record purchase of 8% U.S. Treasury bonds.
Dec. 31
To accrue interest on U.S. Treasury bonds.
Dec. 31
To adjust for decline of securities.
2013, Jan 2
To record receipt of bond interest.
Feb. 1
To record sale of 7 1/2% U.S. Treasury bonds.
2. Show how trading securities would be presented on the December 31, 2012, balance sheet.
Trading securities (at fair value, December 31, 2012) $
1. Prepare journal entries for the preceding transactions and to accrue interest on December 31, 2012. Ignore any amortization of premium or discount on U.S. Treasury bonds. Round your answers to the nearest dollar. For compound transactions, if an amount box does not require an entry, leave it blank.
2012, Jan. 1
Apr. 1
To record sale of 7 1/2% Treasury bonds.
May 21
To record receipt of Conway Co. common dividend.
July 1
To record receipt of interest on U.S. Treasury bonds.
July 1
To record sale of 7% U.S. Treasury bonds.
Aug. 15
To record purchase of Nieman Inc. common stock.
Nov. 1
To record purchase of 8% U.S. Treasury bonds.
Dec. 31
To accrue interest on U.S. Treasury bonds.
Dec. 31
To adjust for decline of securities.
2013, Jan 2
To record receipt of bond interest.
Feb. 1
To record sale of 7 1/2% U.S. Treasury bonds.
Explanation / Answer
SOLUTION
1.
Working note-
Unrealized holding loss and fair value adjustment on December 31,2012 has been computed below-
2.Balance sheet
Date Account titles and Explanation Debit ($) Credit ($) 2012 Jan.1 Cash[(80,000*7%*1/2)+(120,000*7.5%*1/2)] 7,300 Interest receivable 7,300 April 1 Cash 62,125 Trading securities - 7.5% US treasury Bonds ($120,750/2) 60,375 Interest revenue (60,000*7.5%*1/4) 1,125 Gain on sale of investment 625 May 21 Cash (200 * $0.25) 50 Dividend revenue 50 July 1 Cash [(80,000*7%*1/2)+(60,000*7.5%*1/2)] 5,050 Interest revenue 5,050 Cash [(80,000*97.5%)-$250] 77,750 Loss on sale of investment (79,650 -77,750 ) 1,900 Trading securities-7% US treasury bonds 79,650 Aug.15 Trading securities- N Inc. (100*$116) 11,600 Cash 11,600 Nov.1 Trading securities - 8% US treasury bonds ($50,000*1.01) 50,500 Interest receivable ($50,000*8%*4/12) 1,333 Cash 51,833 Dec.31 Interest receivable [($60,000*7.5%*1/2)+(50,000*8%*2/12)] 2,917 Interest revenue 2,917 Unrealized holding loss- Trading securities 4,120 Fair value adjustment- Trading securities 4,120 2013 Jan.2 Cash ($1,333 + $2,917) 4,250 Interest receivable 4,250 Feb.1 Cash 60,675 Loss on sale of Investment 75 Trading securities-7.5% US treasury Bonds (120,750/2) 60,375 Interest revenue (60,000*7.5%*1/2) 375Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.