On February 15, paid $160,000 cash to purchase American General\'s 90-day short-
ID: 2516329 • Letter: O
Question
On February 15, paid $160,000 cash to purchase American General's 90-day short-term notes at par, which are dated February 15 and pay 9% interest (classified as held-to-maturity).
On March 22, bought 750 shares of Fran Industries common stock at $22 cash per share plus a $150 brokerage fee (classified as long-term available-for-sale securities).
On May 15, received a check from American General in payment of the principal and 90 days' interest on the notes purchased in transaction a.
On July 30, paid $48,000 cash to purchase MP3 Electronics' 8% notes at par, dated July 30, 2017, and maturing on January 30, 2018 (classified as trading securities).
On September 1, received a $0.70 per share cash dividend on the Fran Industries common stock purchased in transaction b.
On October 8, sold 375 shares of Fran Industries common stock for $28 cash per share, less a $130 brokerage fee.
On October 30, received a check from MP3 Electronics for three months’ interest on the notes purchased in transaction d.
Prepare journal entries to record the above transactions involving both the short-term and long-term investments of Cancun Corp., all of which occurred during calendar-year 2017. Use the account Short-Term Investments for any transactions that you determine are short term. (Use 360 days in a year. Do not round your intermediate calculations.)
Explanation / Answer
Date Accounts Title Dr Cr Feb 15 (a) Short Term Investment-HTM (American General) $160,000 Cash $160,000 22-Mar Long term investment-AFS (Fran Ind) 16650 b Cash (750*22)+150 16650 15-May Cash 163600 c Short Term Investment-HTM (American General) 160000 Interest Reveune (160000*9%*90/360) 3600 30-Jul Short Term Investment-Trading (MP3) $48,000 d Cash $48,000 1-Sep Cash (.7*750) 525 e Dividend Revenue 525 8-Oct Cash (375*28)-130 10370 f Long term investment-AFS (Fran Ind) 16650/750*375 8325 Gain on sale of long term Investments 2045 960 30-Oct Cash 960 Interest revenue (48000*3/12*8%) If any doubt please comment
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