Stuart Corp. purchased $80,000 of Dumb Co. bonds and $120,000 of Silly Inc. bonds. Both investments are classified as trading. As of December 31, the Dumb Co. bonds are selling for $90,000 and the Silly Inc. bonds are selling for $140,000 per share. Stuart had net income of $150,000 before reporting the impact of investment transactions.

Required:

a.	Record the December 31 adjusting entries for investments.
b.	What is Stuart Corp.'s net income after adjusting for investments?
c.	What is the appropriate balance sheet presentation for these investments?

CHART OF ACCOUNTS

Stuart Corp.

General Ledger

	ASSETS
111	Cash
113	Investment in Trading Securities
121	Accounts Receivable
127	Interest Receivable
141	Inventory
152	Prepaid Insurance
181	Equipment
189	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
250	Unearned Revenue
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue
431	Dividend Income
441	Gain on Sale of Trading Securities
451	Unrealized Holding Gain/Loss: Trading Securities

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expense
910	Income Tax Expense
911	Loss on Sale of Trading Securities
912	Unrealized Holding Gain/Loss: Trading Securities

Record the December 31 adjusting entries for investments.

General Journal Instructions

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2

What is Stuart Corp.'s net income after adjusting for investments?

What is the appropriate balance sheet presentation for these investments?

Stuart Corp.

Partial Balance Sheet

December 31

1	Current Assets:
2