During 2013 and 2014, Foley Co. made the following journal entries to account for transactions involving trading securities:
2013
(a) Nov. 1 Investment in Trading Securities-7% U.S. Treasury Bonds . . . . . 52,417
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,417
To record the purchase of $50,000 of U.S. Treasury bonds at 102.50.
Interest is payable semiannually on January 1 and July 1.
(b) Dec. 31 Unrealized Increase/Decrease in Value of
Available-for-Sale Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,227
Market Adjustment-Trading Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,227
To record the decrease in fair value of the current investment securities based on the following data.

The beginning balance in Market Adjustment-Trading Securities was a $900 credit. There were no other entries in 2013.
2014
(c) Jan. 1 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,750
Interest Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,750
To record interest revenue for 6 months.
(d) July 1 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,750
Interest Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,750
To record interest revenue for 6 months.
(e) Dec. 6 Investment in Available-for-Sale Securities-Lawlor Co. . . . . . . . . . .26,420
Investment in Trading Securities-Lawlor Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,420
To reclassify Lawlor Co. stock from trading securities to available-for-sale securities. Market price was $26,100 at the date of reclassification.
(f) Dec. 31 Unrealized Increase/Decrease in Value of
Available-for-Sale Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 937
Market Adjustment-Available-for-Sale Securities . . . . . . . . . . . . . . . . . . . . . . . . . 220
Market Adjustment-Trading Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 717
To record the decrease in fair value of available-for-sale securities based on the following data.

There were no other entries in 2014.
Instructions:
For each incorrect entry, give the entry that should have been made. Assume the revenue approach is used. Ignore any premium or discount amortization on U.S. Treasury bonds?

Transcribed Image Text:

Cost Market Market Adjustment Lawlor Co. stock *ЖАХ) 34,850 52,417 $113,687 $252st) 36,200 50,000 $111,460 $1,160 Cr. 1,350 Dr. 2,417 Cr. $2,227 Cr. Total Cost Market Market Adjustment $ 500 Dr. 1,217 Cr. 220 Cr. $937 Cr. 7% U.S. Treasury bonds Lawlor Co. stock 52,417 51,200 26,200 $113,687 $112,750 26,420 Total