P10-22B Classifying and accounting for debt and equity investments Captain Transfer Corporation generated excess cash and invested in securities as follows: 2018 Jul. 2 Aug. 21 Purchased 4,200 shares of Naradon, Inc. common stock at $13.00 per share. Captain Transfer plans to sell the stock within three months, when the company will need the cash for normal operations. Captain Transfer does not have significant influence over Naradon. Received a cash dividend of $0.40 per share on the Nardon stock investment. Sold the Naradon stock for $13.70 per share. Purchased a Purple bond for $40,000 at face value. Captain Transfer classifies the investment as trading and short-term. Received a $600 interest payment from Purple. Adjusted the Purple bond to its market value of $44,000. Sep. 16 Oct. 1 Dec. 31 31 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 Captain Transfer's balance sheet at December 31, 2018. 4. Where is the unrealized holding gain or loss associated with the trading debt investment reported? P10-22B Requirement 1 The investment in Naradon, Inc. is an equity investment with no significant influence. The Purple bond is a bond investment classified as a trading debt investment. Requirement 2 Accounts and Explanation Debit Credit Date 2018 Jul. 2 Aug. 21 Sep. 16 Calculations: (a) Total cost Number of shares X Price per share x Total dividend received Number of shares Dividend per share X P10-22B, cont. Requirement 2, cont. (c) Gain on disposal Total cash received Total cost Total cash received Number of shares * Cash received per share