Ralphs Bank buys and sells securities, expecting to earn profits on short- term differences in price. The

Question:

Ralph’s Bank buys and sells securities, expecting to earn profits on short- term differences in price. The company’s fiscal year ends on December 31. The following selected transactions relating to Ralph’s trading account occurred during the year.
December 20 Purchases 300,000 shares in Classic Computers for $ 1,500,000.
December 28 Receives cash dividends of $ 6,000 from the Classic Computers shares.
December 31 The fair value of Classic Computers’ stock is $ 4.80 per share.

Required:
1. Record each of these transactions, including an adjustment on December 31 for the investment’s fair value, if appropriate.
2. Calculate the balance of the Investments account on December 31.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...