In January 2006, the management of Ralley Company concludes that it has sufficient Journalize investment transaccash to purchase some short-term investments in debt and stock securities. During the year, the tions, prepare adjusting entry, following transactions occurred. "'"/ show statement

:d 600 shares of IBT common stock for $40,000, plus brokerage fees of $800.

(a) Gain on sale of debt investments $49,000 Feb. 1 Purchas Mar. 1 Purchased 500 shares of IMA common stock for $15,000, plus brokerage fees of $300.

Apr. 1 Purchased 60 $1,000, 12% CRE bonds for $60,000. plus $1,200 brokerage fees. Interest is payable semiannually on April 1 and October 1.
July 1 Received a cash dividend of $0.60 per share on the IBT common stock.
Aug. 1 Sold 300 shares of IBT common stock at $70 per share, less brokerage fees of $350.
Sept. 1 Received a $1 per share cash dividend on the IMA common stock.
Oct. 1 Received the semiannual interest on the CRE bonds.
Oct. 1 Sold the CRE bonds for $65.000, less $1,000 brokerage fees.
At December 31, the fair value of the IBT common stock was $66 per share. The fair value of the IMA common stock was $30 per share.
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, 2006, to report the investments at fair value.
All securities are considered to be trading securities.

(c) Show the balance sheet presentation of investment securities at December 31. 2006.

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