Buy, Sell, Recording Income Let's forget about fair value adjustment procedure for now. It is an end of the year adjustment and has no impact on entries to buy, sell and record cash income. Portfolios of debt investments may be classified as trading, available for sale, or held to maturity. Equity portfolios are classified based upon the level of influence the owner of the stock has over the company that issued the stock. We will focus on equity investments that give the holder "little or no influence," or less than 20% of ownership... Separate control accounts must be kept for each type of portfolio (trading debt, available for sale debt, held to maturity debt, equity investments), as there are di fferent rules for each. We will use an account for each investment such as "Trading debt- Ford Bonds," or "Equity investment-GM Common Stock." The following investments were owned on December 31, 2013: Investment Trading Debt Ford $1,000 bonds, 7% annual interest Market Quantity Cost $920 each Amortized to $886.28 each at 10% annual effective rate 100 bonds each 12/31. 5 years to maturity. Star $1,000 bonds, 8% annual interest each 12/31. 2 years to maturity. Equity Investments (under 20%) GM common stock Fiserv common $983 each Amortized to 50 bonds $982.41 each at 9% annual effective rate $32 each $60 each $30 each $45 each 5,000 shares 6,000 shares stock $80 each $60 each 10,000 shares Fiserv common stock AMC common stock Acme common stock $25 each $50 each $28 each 10,000 shares 5,000 shares $40 each Use your financial calculator to calculate these amounts using FV, pmt, n and effective rate. Also do amortization table covering the next year Part A: (For Monday) Record the following information for 2014: 1. AS.50 per share dividend was received on the AMC common stock. 2. A 10% stock dividend was received on the Fiserv common stock 3. 2,000 M&I common shares were sold for $75 each less a brokerage fee on the transaction of $200 4. 5,000 Zepco common shares were purchased as Equity investments for $34 each plus brokerage fees of $300 on the transaction. 5. Interest was received on the Star and Ford bonds. on December 31, 2014 is: The portfolio Investment Trading Debt Ford $1,000 bonds, 7% annual interest each 12/31. 4 years to maturity Star $1,000 bonds, 8% annual interest each 12/31. 1 year to maturity. Equity Investments (under 20%) Acme common stock 5,000 shares GM common stock Fiserv common Quantity Cost Market 100 bonds $940 each Use your amortization table 50 bonds Use your amortization table $987 each $30 each $29 each $65 each $50 each 5,000 shares 6,000 shares $30 each $45 each stock M&I common stock Calculate 5,000 shares Calculate Calculate $90 each Zepco common stock $37 each AMC common stock 10,000 shares $32 each $25 each Part B-Market adjustments Calculate and make entries for market adjustments for December 31, 2013 Calculate and make entries for market adjustments for December 31, 2014 Buy, Sell, Recording Income Let's forget about fair value adjustment procedure for now. It is an end of the year adjustment and has no impact on entries to buy, sell and record cash income. Portfolios of debt investments may be classified as trading, available for sale, or held to maturity. Equity portfolios are classified based upon the level of influence the owner of the stock has over the company that issued the stock. We will focus on equity investments that give the holder "little or no influence," or less than 20% of ownership... Separate control accounts must be kept for each type of portfolio (trading debt, available for sale debt, held to maturity debt, equity investments), as there are di fferent rules for each. We will use an account for each investment such as "Trading debt- Ford Bonds," or "Equity investment-GM Common Stock." The following investments were owned on December 31, 2013: Investment Trading Debt Ford $1,000 bonds, 7% annual interest Market Quantity Cost $920 each Amortized to $886.28 each at 10% annual effective rate 100 bonds each 12/31. 5 years to maturity. Star $1,000 bonds, 8% annual interest each 12/31. 2 years to maturity. Equity Investments (under 20%) GM common stock Fiserv common $983 each Amortized to 50 bonds $982.41 each at 9% annual effective rate $32 each $60 each $30 each $45 each 5,000 shares 6,000 shares stock $80 each $60 each 10,000 shares Fiserv common stock AMC common stock Acme common stock $25 each $50 each $28 each 10,000 shares 5,000 shares $40 each Use your financial calculator to calculate these amounts using FV, pmt, n and effective rate. Also do amortization table covering the next year Part A: (For Monday) Record the following information for 2014: 1. AS.50 per share dividend was received on the AMC common stock. 2. A 10% stock dividend was received on the Fiserv common stock 3. 2,000 M&I common shares were sold for $75 each less a brokerage fee on the transaction of $200 4. 5,000 Zepco common shares were purchased as Equity investments for $34 each plus brokerage fees of $300 on the transaction. 5. Interest was received on the Star and Ford bonds. on December 31, 2014 is: The portfolio Investment Trading Debt Ford $1,000 bonds, 7% annual interest each 12/31. 4 years to maturity Star $1,000 bonds, 8% annual interest each 12/31. 1 year to maturity. Equity Investments (under 20%) Acme common stock 5,000 shares GM common stock Fiserv common Quantity Cost Market 100 bonds $940 each Use your amortization table 50 bonds Use your amortization table $987 each $30 each $29 each $65 each $50 each 5,000 shares 6,000 shares $30 each $45 each stock M&I common stock Calculate 5,000 shares Calculate Calculate $90 each Zepco common stock $37 each AMC common stock 10,000 shares $32 each $25 each Part B-Market adjustments Calculate and make entries for market adjustments for December 31, 2013 Calculate and make entries for market adjustments for December 31, 2014