On January 1, Heiress Company had surplus cash and decided to make some long-term investments. The following
Question:
On January 1, Heiress Company had surplus cash and decided to make some long-term investments. The following transactions occurred during the year:
Jan. 1 Purchased thirty $1,000, 11% bonds of McComb Corporation at face value. Semiannual interest payment dates are January 1 and July 1 each year. The bonds are classified as available-for-sale.
Feb. 15 Purchased 3,000 shares of Gordon Corporation stock at $28 per share, plus brokerage fees of $1,100. The stock is classified as available-for-sale.
July 1 Received a semiannual interest payment on the McComb bonds.
Sept. 30 Received an annual cash dividend of $1.00 per share on Gordon stock.
Oct. 15 Sold 1,000 shares of the Gordon stock at $33 per share.
Dec. 31 Adjusted the accounts to accrue interest on the McComb bonds.
Required:
1. Prepare journal entries for these transactions.
2. The market quote for McComb’s bonds at closing on December 31 was 103. The Gordon stock closed at $32 per share. Prepare a partial balance sheet showing all the necessary data for these securities. Assume that Heiress exercises no significant influence over its investees.
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Step by Step Answer:
1 Journal entries Jan 1 Investment in AvailableforSale Securities McComb Corporation 30000 Cash 30000 Purchased 30 1000 bonds Feb 15 Investment in AvailableforSale Securities Gordon Corporation 85100 Cash 85100 Purchased 3000 shares as a longterm investment 3000 x 28 1100 July 1 Cash 1650 Bond Interest Revenue 1650 Received semiannual interest payment for McComb Corporation bonds 30000 x 011 x 12 year Sept 30 Cash 3000 ...View the full answer
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain
