Hurricane Inc. purchased a portfolio of available-for-sale securities

Securities that management expects to sell in the future but which are not actively traded for profit.

in 2016, its first year of operations. The cost and fair value of this portfolio on December 31, 2016, was as follows:

Question not attempted.

1	Name	Number of Shares	Total Cost	Total Fair Value
2	Tornado Inc.	760.00	$12,920.00	$14,820.00
3	Tsunami Corp.	1,220.00	30,988.00	34,648.00
4	Typhoon Corp.	2,170.00	44,051.00	43,400.00
5	Total		$87,959.00	$92,868.00

On June 12, 2017, Hurricane purchased 1,440 shares of Rogue Wave Inc. at $48 per share plus a $100 brokerage commission.

Required:

A.

Provide the journal entries to record the following (refer to the Chart of Accounts for exact wording of account titles and be sure to enter the year as part of the date):

1.	The adjustment of the available-for-sale security portfolio to fair value on December 31, 2016.
2.	The June 12, 2017, purchase of Rogue Wave Inc. stock.

B.

How are unrealized gains and losses treated differently for available-for-sale securities than for trading securities?

CHART OF ACCOUNTS

Hurricane Inc.

General Ledger

	ASSETS
110	Cash
111	Petty Cash
120	Accounts Receivable
121	Allowance for Doubtful Accounts
131	Notes Receivable
132	Interest Receivable
141	Merchandise Inventory
145	Office Supplies
146	Store Supplies
151	Prepaid Insurance
161	Investments-Rogue Wave Inc. Stock
165	Valuation Allowance for Trading Investments
166	Valuation Allowance for Available-for-Sale Investments
181	Land
191	Store Equipment
192	Accumulated Depreciation-Store Equipment
193	Office Equipment
194	Accumulated Depreciation-Office Equipment

	LIABILITIES
210	Accounts Payable
221	Notes Payable
231	Interest Payable
241	Salaries Payable
251	Sales Tax Payable

EQUITY

311

Common Stock

312

Paid-In Capital in Excess of Par-Common Stock

321

Preferred Stock

322

Paid-In Capital in Excess of Par-Preferred Stock

331

Treasury Stock

332

Paid-In Capital from Sale of Treasury Stock

340

Retained Earnings

350

Unrealized Gain (Loss) on Available-for-Sale Investments

351

Cash Dividends

352

Stock Dividends

390

Income Summary

A. Provide the journal entries. Refer to the Chart of Accounts for exact wording of account titles. Be sure to enter the year as part of the date.

PAGE 10

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2
3
4

Solution

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2
3
4

	REVENUE
410	Sales
611	Interest Revenue
612	Dividend Revenue
621	Income of Rogue Wave Inc.
631	Gain on Sale of Investments
641	Unrealized Gain on Trading Investments

	EXPENSES
511	Cost of Merchandise Sold
512	Bad Debt Expense
515	Credit Card Expense
516	Cash Short and Over
520	Salaries Expense
531	Advertising Expense
532	Delivery Expense
533	Repairs Expense
534	Selling Expenses
535	Rent Expense
536	Insurance Expense
537	Office Supplies Expense
538	Store Supplies Expense
561	Depreciation Expense-Store Equipment
562	Depreciation Expense-Office Equipment
590	Miscellaneous Expense
710	Interest Expense
721	Loss of Rogue Wave Inc.
731	Loss on Sale of Investments
741	Unrealized Loss on Trading Investments