In January 2017, the management of Northern Company concludes that it has sufficient cash to purchase some

Question:

In January 2017, the management of Northern Company concludes that it has sufficient cash to purchase some short-term investments in debt and stock securities. During the year, the following transactions occurred.

Feb. 1 Purchased 1,200 shares of LAF common stock for $51,600

Mar. 1 Purchased 500 shares of NCL common stock for $18,500.

Apr. 1 Purchased 70 $1,000, 8% TRC bonds for $70,000. Interest is payable semi-annually on April 1 and October 1.

July 1 Received a cash dividend of $0.80 per share on the LAF common stock.

Aug. 1 Sold 200 shares of LAF common stock at $42 per share.

Sept. 1 Received $2 per share cash dividend on the NCL common stock.

Oct. 1 Received the semiannual interest on the TRC bonds.

Oct. 1 Sold the TRC bonds for $75,700.

At December 31, 1, the fair values of the LAF and NCL common stocks were $39 and $30 per share, respectively.

Instructions

(a) Journalize the transactions and post to the accounts Debt Investments and Stock Investments. (Use the T-account form.)

(b) Prepare the adjusting entry at December 31, 2017, to report the investments at fair value. All securities are considered to be trading securities.

(d) Identify the income statement accounts and give the statement classification of each account.

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