Swifty Corporation made the following cash purchases of securities during 2017,

Question

Swifty Corporation made the following cash purchases of securities during 2017, which is the first year in which Swifty invested in securities. 1. On January 15, purchased 10,050 shares of Sanchez Company’s common stock at $40.20 per share plus commission $2,030. 2. On April 1, purchased 5,050 shares of Vicario Co.’s common stock at $62.40 per share plus commission $3,420. 3. On September 10, purchased 7,050 shares of WTA Co.’s preferred stock at $31.80 per share plus commission $4,960. On May 20, 2017, Swifty sold 4,050 shares of Sanchez Company’s common stock at a market price of $42 per share less brokerage commissions, taxes, and fees of $3,900. The year-end fair values per share were Sanchez $36, Vicario $66, and WTA $33.60. In addition, the chief accountant of Swifty told you that the corporation plans to hold these securities for the long-term but may sell them in order to earn profits from appreciation in prices. The equity method of accounting is not appropriate for these stock purchases.

Explanation / Answer

Date Account Tittle Debit Credit 15-Jan Availble for Sale Securities- Sanchez 406040 Cash ((10050X$40.20)+ $2030) 406040 (Purchase of Securities - Common Stock) 01-Apr Availble for Sale Securities- Vicario 318540 Cash ((5050X$62.40)+$3420) 318540 (Purchase of Securities - Common Stock) 10-Sep Availble for Sale Securities- WTA Co. 229150 Cash (7050X $31.80)+$4960 229150 (Purchase of Securities - Preferred Stock) Journal Entries Date Account Tittle Debit Credit 20-May Cash ((4050X$42)-$3900) 166200 Availble for Sale Securities- Sanchez 163628 Gain on Sales of Securrities {(($42- (406040/10050))X4050}-$3900 2572 (Sale of Securities- Common Stock) Calculation of Unrealized Gain /Loss Sanchez =(($36X(10050-4050))- ($406040-$163628))= ($26412) Vicario =($5050*$66)-$318540= $14760 WTA Co. =(7050*$33.60)-$163628=$73252

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