Problem 15-4A

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.

7 Purchased 2,000 shares of PepsiCo stock at $49 per share.

Jul. 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.

30Received a $1.50 per share cash dividend on the PepsiCo shares.

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 Rose's 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 Loss -Income, $6,000

4. Prepare the current asset section of the balance sheet for the fair value adjustment for Rose's short-term investments.

5. Identify the dollar increase or decrease from Rose's short-term stock investments on (a) its income statement for this year and (b) the equity section of its balance sheet at this year-end.