*Problem 12-2A In January 2015, the management of Kinzie Company concludes that

ID: 2499000 • Letter: #

Question

*Problem 12-2A In January 2015, 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 800 shares of Muninger common stock for $42,400 Mar. 1 Purchased 790 shares of Tatman common stock for $18,170 Apr. 1 Purchased 40 $1,200, 9% Yoakem bonds for $48,000. Interest is payable semiannually on April 1 and October 1. July 1 Received a cash dividend of $0.50 per share on the Muninger common stock. Aug. 1 Sold 240 shares of Muninger common stock at $62 per share Sept. Received a $2 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 $47,000 At December 31, the fair value of the Muninger common stock was $54 per share. The fair value of the Tatman common stock was $22 per share Your answer is partially correct. Try again ournalize the transactions and post to the accounts Debt Investments and Stock Investments. (Use the T-account form.) (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No entry" for the account titles and enter O for the amounts. If the ending balance is 0 select Dec. 31 Bal. for the date and enter 0 for the normal balance for that account.)

Explanation / Answer

Ans:

(a) Feb. 1 Stock Investments.......................................................... 42,400

Cash ..................................................................... 42,400

Mar. 1 Stock Investments.......................................................... 18,170

Cash ..................................................................... 18,170

Apr. 1 Debt Investments........................................................... 48,000

Cash ..................................................................... 48,000

July 1 Cash ($.50 X 800).......................................................... 400

Dividend Revenue............................................... 400

Aug. 1 Cash .............................................................................. 14,880

Stock Investments................................................ 12,720

[($42,400 ÷ 800) X 240]

Gain on Sale of Stock

Investments...................................................... 2,160

Sept. 1 Cash ($2 X 790)............................................................. 1,580

Dividend Revenue............................................... 1,580

Oct. 1 Cash ($48,000 X 9% X 1/2).......................................... 2,160

Interest Revenue.................................................. 2,160

1 Cash ($48,000 – $1,000)................................................ 47,000

Loss on Sale of Debt Investments................................ 1,000

($48,000 – $47,000)

Debt Investments................................................. 48,000

Stock Investments

Debt Investments

Feb. 1 42,400

Mar. 1 18,170

Aug. 1 12,720

Apr. 1 48,000

Oct. 1 48,000

Dec. 31 Bal. 47,850

Dec. 31 Bal. 0

(b) Dec. 31 Unrealized Loss—Income........................................................... 230

Market Adjustment—Trading................................................. 230

($47,850 – $47,620)

Security

Cost

Fair Value

Hiens common

Pryce common

$29,680

18,170

$47,850

$30,240

17,380

$47,620

(560 X $54)

(790 X $22)