Question
Rios Financial Co. is a regional insurance company that began operations on January 1, Year 1. The following transactions relate to trading securities acquired by
Rios Financial Co. is a regional insurance company that began operations on January 1, Year 1. The following transactions relate to trading securities acquired by Rios Financial Co., which has a fiscal year ending on December 31:
Record these transactions on page 10:
Year 1 | ||
Feb. | 1. | Purchased 6,600 shares of Caldwell Inc. as a trading security at $43 per share plus a brokerage commission of $660. |
May | 1. | Purchased 1,800 shares of Holland Inc. as a trading security at $46 plus a brokerage commission of $198. |
July | 1. | Sold 3,430 shares of Caldwell Inc. for $41 per share less a $115 brokerage commission. |
31. | Received an annual dividend of $0.25 per share on Caldwell Inc. stock. | |
Dec. | 31. | The portfolio of trading securities was adjusted to fair values of $41 and $45 per share for Caldwell Inc. and Holland Inc., respectively. |
Record these transactions on page 11:
Year 2 | ||
Apr. | 1. | Purchased 3,900 shares of Fuller Inc. as a trading security at $28 per share plus a $195 brokerage commission. |
July | 31. | Received an annual dividend of $0.40 per share on Caldwell Inc. stock. |
Oct. | 14. | Sold 780 shares of Fuller Inc. for $30 per share less a $45 brokerage commission. |
Dec. | 31 | The portfolio of trading securities had a cost of $307,141 and a fair value of $385,878, requiring a debit balance in Valuation Allowance for Trading Investments of $78,737 ($385,878 - $307,141). Thus, the credit balance from December 31, Year 1, is to be adjusted to the new balance. |
Required: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1. | Journalize the entries to record these transactions. Round all final amounts to the nearest whole dollar.* | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2. | Prepare the investment-related current asset balance sheet presentation for Rios Financial Co. on December 31, Year 2.* | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3. | How are unrealized gains or losses on trading investments presented in the financial statements of Rios Financial Co.?
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