The following investing transactions by Lateral Inc. took place during the current year. 1. On January 1, purchased 500 Pincus Corporation bonds for $564,000 cash. The bonds have a face value of $1,000 each and an annual coupon rate of interest of 6% that is paid semi-annually on June 30 and December 31. 2. On June 30, receive interest of $18,000. 3. On June 30, the fair value of a Pincus Corporation bond is $1,104. 4. On July 31, all of the Pincus Corporation bonds are sold for $540,000 cash.

	Balance Sheet									Income Statement
	Cash		Noncash				Contrib.		Earned					Net
Transaction	Asset	+	Assets	=	Liabilities	+	Capital	+	Capital	Revenues	-	Expenses	=	Income
(1) Purchased 500 Pincus bonds.	Answer		Answer		0		0		Answer	Answer		Answer		Answer
	AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A		AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	=	N/A		N/A		AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	-	AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	=
(2) Receive interest payment	Answer		Answer		0		0		Answer	Answer		Answer		Answer
from Pincus bonds.	AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A		AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	=	N/A		N/A		AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	-	AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	=
(3) To adjust bonds to fair value	Answer		Answer		0		0		Answer	Answer		Answer		Answer
on June 30.	AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A		AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	=	N/A		N/A		AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	-	AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	=
(4) On July 31, sell all 500 Pincus	Answer		Answer		0		0		Answer	Answer		Answer		Answer
bonds.	AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A		AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	=	N/A		N/A		Unrealized loss (AOCI)	AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	-	AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	=
									Answer
									AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A

Part 2: Trading securities Use the same transaction information 1 through 4 from part 1 to answer the following, assuming that the investments are now classified as trading securities. Enter the effects (amount and account) relating to these transactions in the financial statement effects template.

	Balance Sheet									Income Statement
	Cash		Noncash				Contrib.		Earned					Net
Transaction	Asset	+	Assets	=	Liabilities	+	Capital	+	Capital	Revenues	-	Expenses	=	Income
(1) Purchased Pincus bonds.	Answer		Answer		0		0		Answer	Answer		Answer
	AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A		AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	=	N/A		N/A		AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	-	AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	=	Answer
(2) Receive interest payment	Answer				0		0		Answer	Answer		Answer		Answer
from Pincus bonds.	AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A			=	N/A		N/A		AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	-	AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	=
(3) To adjust fair value of Pincus	Answer		Answer		0		0		Answer	Answer		Answer		Answer
on June 30.	AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A		AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	=	N/A		N/A		AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	-	AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	=
(4) On July 31, sell all 500 King Co.	Answer		Answer		0		0		Answer	Answer		Answer		Answer
bonds.	AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A		AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	=	N/A		N/A		AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	-	AnswerCashInterest incomeInvestmentsRealized gainUnrealized gainRealized lossUnrealized lossRetained earningsUnrealized gain (AOCI)Unrealized loss (AOCI)N/A	=