Brown package Corporation generated excess cash and invested in securities as follows:

requirements:

1.Classify each of the investments made during 2018. (Assume the equity investments represent less than 20% of ownership of outstanding voting stock.)

2.Journalize the 2018 transactions. Explanations are not required.

3.Prepare T-accounts for the investment assets, and show how to report the investments on Brown Package's

balance sheet at December 31, 2018.

4.Where is the unrealized holding gain or loss associated with the trading debt investment reported?

Transaction History

2018

Jul. 2

Purchased 3,300 shares of Cone, Inc. common stock at $14.00 per share. Brown Package plans to sell the stock within three months, when the company will need the cash for normal operations. Brown Package does not have significant influence over Cone.

Aug. 21

Received a cash dividend of $0.30 per share on the Cone stock investment.

Sep. 16

Sold the Cone stock for $14.20 per share.

Oct. 1

Purchased a Volton bond for $26,000 at face value. Brown Package classifies the investment as trading and short-term.

Dec. 31

Received a $200 interest payment from Volton.

Dec. 31

Adjusted the Volton bond to its market value of $28,000.

Requirement 1. Classify each of the investments made during

2018.

(Assume the investments represent less than 20% of ownership of outstanding voting stock.)

Classification

Reason

Cone stock

(available-for-sale debt investment,controlling interest equity investment,held-to-maturity debt investment,no significant interest equity invest, significant interest equity invest.,trading debt invest.)

(intent is to hold for less than a year, intent is to hold for several years,investment will be held to maturity, ownership is between 20% and 50% of total outstanding stock,ownership is greater than 50% of total outstanding stock, ownership is less than 20% of total outstanding stock)

Volton bond

(available-for-sale debt investment,controlling interest equity investment,held-to-maturity debt investment,no significant interest equity invest, significant interest equity invest.,trading debt invest.)

(intent is to hold for less than a year, intent is to hold for several years,investment will be held to maturity, ownership is between 20% and 50% of total outstanding stock,ownership is greater than 50% of total outstanding stock, ownership is less than 20% of total outstanding stock)