Problem 4-1 Trading Securities

Supporting records of Maryon Company's trading securities portfolio show the following debt and equity securities:

Security Cost Fair Value

200 ordinary shares, Curverous Co. 127,250 121,500 $400,000 Typho Company, 7% bonds 398,250 387,000 $600,000 Tourist, Inc., 7.5% bonds 603,750 609,450

Interest dates on the bonds are January 1 and July 1. Maryon Company uses the income approach to record the purchase of bonds with accrued interest.During 2018 and 2019 Maryon Company ]completed the following transactions related to trading securities:

2018

Jan.1. Received semiannual interest on bonds.Assume that the appropriate adjusting entry was made on December 31, 2017.

April1. Sold $300,000 of7.5% Tourist Inc. bonds at 102 plus accrued interest.Brokerage fees were $1,000. May21. Received dividend of $1.25 per share on the Curverous Co. ordinary share capital. The dividend had not been recorded on the declaration date.

July1. Received semiannual interest on bonds and then sold the 7% Typho Company bonds at 97.5.Brokerage fees were $1,250.

Aug.15. Purchased 100 shares of Nelson Company ordinary share capital at $580 per share plus brokerage fees of $250.

Nov.1. Purchased $250,000 of 8% Tesla Company bonds at 101 plus accrued interest. Brokerage fees were $625.Interest dates are January 1 and July 1.

Dec.31. Market prices of the securities:

Curverous Co. $ 550

7.5 %Tourist, Inc bonds 101.75

8% Tesla Company bonds 101

Nelson Company ordinary shares $583.75

2019

Jan.2. Recorded the receipt of semiannual interests on bonds.

Feb.1. Sold the remaining 7.5% Tourist bonds at 101 plus accrued interest.Brokerage fees were $1,500.

Required:

1. What is the total interest and dividend income for 2018? 2. What amount should be reported as gain on sale of trading securities in 2018?

3. What amount of unrealized gain or loss should be reported in the income statement for the year ended December 31, 2018?

4. What is the carrying amount of the remaining trading securities on December 31, 2018?

5. What is the gain/loss on the sale of the remaining Tourist , Inc. bonds on February 1, 2019?

6. Prepare journal entries for the preceding transactions and to accrue interest on December 31, 2018.Ignore amortization of premium or discount on bonds.