3.00 points Exercise C-6 Transactions in short-term and long-term investments LO

Question

3.00 points Exercise C-6 Transactions in short-term and long-term investments LO P1, P2, P3 a. On February 15, paid $150,000 cash to purchase American Generar's 90-day short-lerm notes at par which are dated February 15 and pay 9% interest (classified as held-to-maturity). b. On March 22, bought 650 shares of Fran Industries common stock at $33 cash per share plus a $130 brokerage fee (classified as long-term available-for-sale securities) c. 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 d. OnJuly 30, paid $45,000 cash to purchase MP3 Electronics' 8% notes at par, dated July 30, 2015, and maturing on January 30, 2016 (classified as trading securities) e. On September 1, received a $0.74 per share cash dividend on the Fran Industries common stock purchased in transaction b. On October 8, sold 325 shares of Fran Industries common stock for $39 cash per share, less a $110 brokerage fee g. 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 shor-tem and long-term investments of Cancun Corp, all of which occurred during calendar-year 2015. Use the account Shor-Term any transactions that you determine are short term. (Use 360 days in a year. Do not round your intermediate calculations)

Explanation / Answer

No Explanation Debit Credit a Short Term Invest Held To Maturity 150000 Cash 150000 b Long Term Investment 21580 Cash 21580 (650*33+130) c Cash 153375 Short-term investment HTM 150000 Interest Revenue 3375 (150000+(150000*9%*3/12)) d Short-term investments trading 45000 Cash 45000 e Cash 481 Dividend Revenue 481 (.74*650) f Cash 12565 Long Term Investment AFS 12565 (325*39-110) g Cash 900 Interest Revenue 900 (45000*8%*3/12)

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