P16-2A 71 Problems: Set A uary 2017, the management of Kinzie Company concludes

Question

P16-2A

71 Problems: Set A uary 2017, the management of Kinzie Company concludes that it has su 16-2A In Jan cient o permit some short-term investments in debt and stock securities. During thedjusting entr tronsactions, prepare adjusting entry, and show the following transactions occurred. securities. During the 1 Purchased 600 shares of Muninger common stock for $32,400. febuchased 800 shares of Tatman common stock for $20,000. atement presenttion chased 50 $1,000.7% Yoakem bonds for $50000. Interest is payable semiannually on April 1 and October 1 Received a cash dividend of $0.60 per share on the Muninger common stock Received a SI per share cash dividend on the Tatman Sold the Yoakem bonds for $49,000. July 1 Aug. 1 Sold shar 200 shares of Muninger common stock at $58 per share d a S1 per share cash dividend on the Tatman common stock ved the semiannual interest on the Yoakem bonds Oct. 1 Rec 1 . December 31, the fair value of the Muninger common stock was $55 per share. The fair value of the Tatman common stock was $24 per share Instructions lournalize the transactions and post to the accounts Debt Investments and Stock (b) Prepare the adjusting entry at December 31, 2017, to report the investment securities (c) Show the balance sheet presentation of investment securities at December 31, 2017. Investments. Use the T-account form.) at fair value. All securities are considered to be trading securities (d) Identify the income statement accounts and give the statement classification of each account

Explanation / Answer

(a) DATE DESCRIPTION DEBIT CREDIT Feb 1. Stock investments-Muninger 32400 Cash 32400 (Purchased 600 shares of Muninger) Mar 1. Stock investments-Tatman 20000 Cash 20000 (Purchased 800 shares of Tatman) Apr 1. Debt investments-Yoakem bonds 50000 Cash 50000 (Purchased 50 $1000,7% yoakem bonds) July 1. Cash (600*0.60) 360 Dividend income 360 (Received cash dividend) Aug 1. Cash (200*58) 11600 Realized gain on trading securities 800 Stock investments-Muninger (32400/600)*200 10800 (Sale of 200 shares of Muninger) Sep 1. Cash (800*1) 800 Dividend income 800 (Received cash dividend) Oct 1. Cash (50000*7%*6/12) 1750 Interest income 1750 (Received semi-annual interest on bond ) Oct 1. Cash 49000 Realized loss on debt investments 1000 Debt investments-Yoakem bonds 50000 (Sold the yoakem bonds) Stock investments-Muninger Date Account titles Debit Credit Balance Feb 1. Cash 32400 32400 Aug 1. Cash 10800 21600 Stock investments-Tatman Date Account titles Debit Credit Balance Mar 1. Cash 20000 20000 Debt investments-Yoakem bonds Date Account titles Debit Credit Balance Apr 1. Cash 50000 50000 Oct 1. Cash 49000 1000 Oct 1. Realized loss on debt investments 1000 0 b. Adjusting entries: DATE DESCRIPTION DEBIT CREDIT Dec 31. Stock investments-Muninger 400 Unrealized gain on stock investments 400 400*[55-(32400/600)] (Trading securities recorded at fair value) Dec 31. Unrealized loss on stock investments 800 Stock investments-Tatman 800 800*[(20000/800)-24] (Trading securities recorded at fair value) c. Partial balance sheet Assets Current assets: Short-term investments Stock investments-Muninger 22000 Stock investments-Tatman (20000-800) 19200 41200 Stockholder's equity Unrealized gain on stock investments 400 Unrealized loss on stock investments -800 d. Partial income statement Other income: Dividend income 1160 Realized gain on trading securities 800 Other expenses: Realized loss on debt investments 1000

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