Investing in Trading Securities Modar Company purchased 200 common shares each of Otter, Plain, and Tarm companies

Question:

Investing in Trading Securities Modar Company purchased 200 common shares each of Otter, Plain, and Tarm companies on January 1, 2001, at a cost of $100, $40, and

$70 per share, respectively. On December 31, 2001, the market values of the shares were $110, $35, and $58, respectively, and Modar Company considers the shares to be part of its trading portfolio.

a. At what amount will the investments be reported in Modar’s balance sheet at December 31, 2001?

b. Will any other balance sheet or income statement accounts be affected by the accounting treatment of these securities? If so, which accounts, and what will be the effect?

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