Rose Company had no short-term investments prior to year 2013. It had the follow
ID: 2423482 • Letter: R
Question
Rose Company had no short-term investments prior to year 2013. It had the following transactions involving short-term investments in available-for-sale securities during 2013.
Apr. 16 Purchased 4,000 shares of Gem Co. stock at $25.75 per share plus a $400 brokerage fee.
May 1 Paid $160,000 to buy 90-day U.S. Treasury bills (debt securities): $160,000 principal amount, 5% interest, securities dated May 1.
July 7 Purchased 2,000 shares of PepsiCo stock at $49.00 per share plus a $370 brokerage fee.
July 20 Purchased 1,000 shares of Xerox stock at $15.00 per share plus a $450 brokerage fee.
Aug. 3 Received a check for principal and accrued interest on the U.S. Treasury bills that matured on July 29.
Aug.15 Received an $0.95 per share cash dividend on the Gem Co. stock.
Aug. 28 Sold 2,000 shares of Gem Co. stock at $32.50 per share less a $490 brokerage fee.
Oct. 1 Received a $2.00 per share cash dividend on the PepsiCo shares.
Dec. 15 Received a $1.10 per share cash dividend on the remaining Gem Co. shares.
Dec. 31 Received a $1.20 per share cash dividend on the PepsiCo shares.
1. Prepare journal entries to record the preceding transactions and events.
2. Prepare a table to compare the year-end cost and fair values of Perry’s short-term investments in available-for-sale securities. The year-end fair values per share are: Gem Co., $28.00; PepsiCo, $46.25; and Xerox, $12.00.
3. Prepare an adjusting entry, if necessary, to record the year-end fair value adjustment for the portfolio of short-term investments in available-for-sale securities.
Explanation / Answer
1. Journal entries to record the preceding transactions and events.
TO cash
(Being Purchased 4,000 shares of Gem Co. stock at $25.75 per share plus a $400 brokerage fee
2 A table to compare the year-end cost and fair values of Perry’s short-term investments in available-for-sale securities. The year-end fair values per share are: Gem Co., $28.00; PepsiCo, $46.25; and Xerox, $12.00.
3 adjusting entry, to record the year-end fair value adjustment for the portfolio of short-term investments in available-for-sale securities
Date Description Debit $ Credit $ April 16 Short Term Inv. AFS (GEM) 103,400TO cash
(Being Purchased 4,000 shares of Gem Co. stock at $25.75 per share plus a $400 brokerage fee
403,400 May 1 Short Term Investments (Tbills) 160,000 Cash 160,000 (Being Amount Paid $160,000 to buy 90-day U.S. Treasury bills (debt securities)) July 7 Short Term Investments AFS (Pepsi) 98,370 To Cash 97,370 ( Being Purchased 2,000 shares of PepsiCo stock at $49.00 per share plus a $370 brokerage fee) July 20 Short Term Investments AFS (Xerox) 15,450 To Cash 15,450 (Being Purchased 1,000 shares of Xerox stock at $15.00 per share plus a $450 brokerage fee) Aug 3 Cah 168,000 Short Term Investments AFS (Tbills) 160,000 Interest Revenue 8,000 (Received a check for principal and accrued interest on the U.S. Treasury bills that matured on July 29 Aug 15 Cash 3,800 Dividend Revenue 3,800 ( Being the amount Received an $0.95 per share cash dividend on the Gem Co. stock) (4000*.95) Aug 28 Cash 64,510 Short Term Investments AFS (Gem) 510,10 Gain on sale of short term investments 13,500 (Sold 2,000 shares of Gem Co. stock at $32.50 per share less a $490 brokerage fee) Oct 1 Cash 4,000 Dividend Revenue 4,000 (Received a $2.00 per share cash dividend on the PepsiCo shares) Dec 15 Cash 2,200 To Dividend Revenue 2,200 (Received a $1.10 per share cash dividend on the remaining Gem Co. shares) Dec 31 Cash 2,400 To devidend revenue 2,400 (Received a $1.20 per share cash dividend on the PepsiCo shares)Related Questions
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