Ezekiel Jennings

Problem 15-4A Recording, adjusting, and reporting stock investments with insignificant influence P4

Rose Company had no short-term investments prior to this year. It had the following transactions this year involving short-term stock investments with insignificant influence.

Apr.	16	Purchased 3,500 shares of Gem Co. stock at $24 per share.
July	7	Purchased 2,000 shares of PepsiCo stock at $49 per share.
	20	Purchased 1,000 shares of Xerox stock at $16 per share.
Aug.	15	Received a $1.00 per share cash dividend on the Gem Co. stock.
	28	Sold 2,000 shares of Gem Co. stock at $30 per share.
Oct.	1	Received a $2.50 per share cash dividend on the PepsiCo shares.
Dec.	15	Received a $1.00 per share cash dividend on the remaining Gem Co. shares.
	31	Received a $1.50 per share cash dividend on the PepsiCo shares.

Required

1. Prepare journal entries to record the preceding transactions and events.
2. Prepare a table to compare the year-end cost and fair values of Roses short-term stock investments. The year-end fair values per share are Gem Co., $26; PepsiCo, $46; and Xerox, $13.

Check (2) Cost = $150,000

3. Prepare an adjusting entry to record the year-end fair value adjustment for the portfolio of short-term stock investments.

(3) Dr. Unrealized LossIncome, $6,000

Analysis Component

4. Explain the balance sheet presentation of the fair value adjustment for Roses short-term investments.
5. How do these short-term stock investments affect Roses (a) income statement for this year and (b) the equity section of its balance sheet at this year-end?