During the year ended December 31, 2017, Rakai Corporation, a public company, had the following transactions related

Question:

During the year ended December 31, 2017, Rakai Corporation, a public company, had the following transactions related to investments held for trading purposes:

Feb. 1 Purchased 575 IBF common shares for $25,300.

Mar. 1 Purchased 1,500 Raimundo common shares for $48,000.

Apr. 1 Purchased $200,000 of CRT 3% bonds at par. Interest is payable semi-annually on April 1 and October 1.

July 1 Received a cash dividend of $1.50 per share on the IBF common shares.

Aug. 1 Sold 250 IBF common shares at $48 per share.

Oct. 1 Received the semi-annual interest on the CRT bonds.

1 Sold the CRT bonds for $205,000.

Dec. 31 The fair values of the IBF and Raimundo common shares were $50 and $28 per share, respectively.

Instructions

(a) Record the transactions and any required year-end adjusting entries.

(b) Show the financial statement presentation of the investments and any related accounts in the financial statements for the year ended December 31, 2017.

TAKING IT FURTHER

If Rakai Corporation anticipated that it would need the cash that was used to invest in the investments in the near future, should the company have invested in equity securities? What would you recommend to the company?

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