Problem I Katie Company uses its idle cash to make short-term investments in equ

Question

Problem I Katie Company uses its idle cash to make short-term investments in equity securities The following table summarizes information related to its investments. Equity Securities Purchased Purchased Price per Per Share Per Share Date Initial Shares Purchase Market Price | Market Price share SOR1231/12 $98 12/31/13 BCD, Inc XYZ. Inc KLK, Inc EFG, Inc.1/10/12 200 300 900 200 $100 23 80 S95 24 82 7/15/12 3/15/12 84 9 Katie Company, a calendar year-end company, clssifies the investments in BCD, Inc. and XYZ Inc. as trading securities; and the investments in KLK and EFG Inc as available-for-sale securities. On March 15, 2013, Katie Company sold 100 shares of XYZ for $25 each. Katie does NOT exert significant influence over any of its investees Required: 1. Show the journal entry to record the 2012 year-end adjustment for the trading securities portfolio. 2. Show the journal entry to record the sale of XYZ shares in 2013. 3. Show the journal entry to record the 2013 year-end adjustment for the trading securities portfolio. 4. What is the net book value for the available-for-sale securities at 12/31/20137

Explanation / Answer

Answer 1. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 31-Dec-12 Trading Securities          700.00    Unrealized Gains on Trading Securities       700.00 (To record the fair value adjustments) Cost Market Value Difference BCD Inc     19,600.00          20,000.00              400.00 XYZ Inc.       6,600.00             6,900.00              300.00 Total              700.00 Answer 2. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 15-Mar-13 Cash      2,500.00    Trading Securities    2,200.00    Gain on Sale of Trading Securities (record the sale of Trading securities) Answer 3. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 31-Dec-13 Loss on Sale of Trading Securities          900.00    Trading Securities       900.00 (To record the fair value adjustments) Cost Market Value Difference BCD Inc     19,600.00          19,000.00           (600.00) XYZ Inc.       4,400.00             4,800.00              400.00 Total           (200.00) Balance - B/f              700.00 Fair Value Adjustment           (900.00) Answer 4. Cost    77,200.00 Fair Value Adjustments    (1,600.00) Net Book Value of Available for Sale Securities    75,600.00 Cost Market Value KLK Inc     75,600.00          73,800.00 EFG Inc.       1,600.00             1,800.00 Total     77,200.00          75,600.00

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