During the fourth quarter of 2021, Rainbarrel, Inc., generated excess cash, which the company invested in equity securities as follows:

Requirements 

1. Open T-accounts for Cash (including its beginning balance of $23,000), Investment in Equity Securities, Dividend Revenue, and Unrealized Gain (Loss) on Equity Securities.

2. Journalize the foregoing transactions and post to the T-accounts.

3. Show how to report the short-term investment on Rainbarrel’s balance sheet at December 31, 2021.

4. Show how to report whatever should appear on Rainbarrel’s income statement for the year ended December 31, 2021.

5. Rainbarrel sold the equity securities for $6,000 on January 14, 2022. Journalize the sale.

Transcribed Image Text:

2021 Nov 16 Dec 16 Dec 31 Purchased 1,200 common shares as an investment in equity securities, paying $6 per share. Rainbarrel owns less than 10% of the outstanding stock in the companies in which it invests. Received cash dividend of $0.35 per share on the equity securities. Adjusted the equity securities to fair value of $4 per share.