Exercise E-6 Effect of marketable investment securities transactions on financial statements The following transactions pertain to Harrison Imports for Year 1: 1. Started business by acquiring $30,000 cash from the issue of common stock. 2. Provided $90,000 of services for cash. 3. Invested $35.000 in marketable investment scurities 4. Pald $18,000 of operating expense, 5. Received $500 of investment income from the securities 6. Invested an additional $16,000 in marketable investment securities 7. Paid a $2,000 cash dividend to the stockholders. 8. Sold investment securities that cost $8,000 for $14,000 9. Received another $1,000 in investment income 10. Determined the market value of the investment securities at the end of the year was $42,000. Required Use a vertical statements model to prepare a Year 1 income statement, balance sheet, and statement of cash flows, assumine marketable Investment securities were classified as (a) held to maturity. (b) trading, and (c) available for sale. (Hint Record the T-accounts prior to preparing the financial statements.) (Record the transactions in the given order. Amounts to be deducte outflows and losses should be indicated with a minus sign.) (a) Held-to-Maturity Cash Investment Securities Beg Bal Beg Bal End Bal End Bal Common Stock Dividends Beg Bal Beg Bal End Bal End Bal Service Revenue Investment Income Beg Bal Bog Bal End Bal End Bal Service Revenue Investment Income Beg Bal Beg Bal End. Bal End Bal Gain on Sale of Investment Operating Expenses Beg Bal Beg Bal End Bal End Bal mheducation.com/ext/map/index.html?_con=con&external browser=0&launchurl=https%253A%252F%252 Ice Questions Saved b) Trading Cash Investment Securities Beg Bal Beg Bal End Bal End Bal Common Stock Dividends Bog Bal Beg Bal End Bal End Bal Service Revenue Investment income Bog Bal Beg Bal End Bal End Bal Service Revenue Investment Income Beg Bal Beg Bal End, Bal End Bal Gain on Sale of Investment Operating Expenses Beg Bal Beg Bal d. Bal End Bal (income Statement Account) Unrealized Gain/Loss Beg Bal End Sal (c) Available-for-Sale Cash Investment Securities Beg Bal Beg Bal End Bal End. Bal Common Stock Dividends Bog Bal Beg Bal End Bal End Bal Accum. Other Comp. Income Unrealized Gain/Loss Service Revenue Beg Bal Beg Bal End Bal End Bal Appronary & Pation Question to.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%25 ctice Questions Saved Unrealized Gain/Loss Service Revenue Beg Bal Beg Bal End Bal End Bal Investment Income Gain on Sale of Invest Beg Bal Beg Bal End Bal End Bal Operating Expenses Beg Bal End Bal HARRISON IMPORTS HARRISON IMPORTS Income Statements For the Year Ended Year 1 Investment Securities Classified as Held-to- Maturity Trading Available- for-Sale 0 0 0 $ $ 0 $ 0 $ 0 erto meducation.com/ext/map/index.html?_con-congexternal_browser=0&launchUrl=https%253A%252F% Saved E Practice Questions HARRISON IMPORTS Balance Sheets As of December 31, Year 1 Held-to- Investment Securities Classified as Maturity Assets Trading Available for Sale 5 D$ OS 0 Total Assets Stockholders' Equity Total Stockholders' Equity 5 05 05 0 HARRISON IMPORTS statements of Cash Fiwe For the Year Ended Oncerter 11 Year Heidi HARRISON IMPORTS Statements of Cash Flows For the Year Ended December 31, Year 1 Held-to- Investment Securities Classified as Trading Maturity Cash flows from operating activities Available-for- Sale 0 Net cash flow from operating activities Cash flow from investing activities 0 Net cash flow from investing activities Cash flow from financing activities 0 0 Not cash flow from financing activities Net change in cash Ending cash balance S 0 $ 0 $ 0 Exercise E-6 Effect of marketable investment securities transactions on financial statements The following transactions pertain to Harrison Imports for Year 1: 1. Started business by acquiring $30,000 cash from the issue of common stock. 2. Provided $90,000 of services for cash. 3. Invested $35.000 in marketable investment scurities 4. Pald $18,000 of operating expense, 5. Received $500 of investment income from the securities 6. Invested an additional $16,000 in marketable investment securities 7. Paid a $2,000 cash dividend to the stockholders. 8. Sold investment securities that cost $8,000 for $14,000 9. Received another $1,000 in investment income 10. Determined the market value of the investment securities at the end of the year was $42,000. Required Use a vertical statements model to prepare a Year 1 income statement, balance sheet, and statement of cash flows, assumine marketable Investment securities were classified as (a) held to maturity. (b) trading, and (c) available for sale. (Hint Record the T-accounts prior to preparing the financial statements.) (Record the transactions in the given order. Amounts to be deducte outflows and losses should be indicated with a minus sign.) (a) Held-to-Maturity Cash Investment Securities Beg Bal Beg Bal End Bal End Bal Common Stock Dividends Beg Bal Beg Bal End Bal End Bal Service Revenue Investment Income Beg Bal Bog Bal End Bal End Bal Service Revenue Investment Income Beg Bal Beg Bal End. Bal End Bal Gain on Sale of Investment Operating Expenses Beg Bal Beg Bal End Bal End Bal mheducation.com/ext/map/index.html?_con=con&external browser=0&launchurl=https%253A%252F%252 Ice Questions Saved b) Trading Cash Investment Securities Beg Bal Beg Bal End Bal End Bal Common Stock Dividends Bog Bal Beg Bal End Bal End Bal Service Revenue Investment income Bog Bal Beg Bal End Bal End Bal Service Revenue Investment Income Beg Bal Beg Bal End, Bal End Bal Gain on Sale of Investment Operating Expenses Beg Bal Beg Bal d. Bal End Bal (income Statement Account) Unrealized Gain/Loss Beg Bal End Sal (c) Available-for-Sale Cash Investment Securities Beg Bal Beg Bal End Bal End. Bal Common Stock Dividends Bog Bal Beg Bal End Bal End Bal Accum. Other Comp. Income Unrealized Gain/Loss Service Revenue Beg Bal Beg Bal End Bal End Bal Appronary & Pation Question to.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%25 ctice Questions Saved Unrealized Gain/Loss Service Revenue Beg Bal Beg Bal End Bal End Bal Investment Income Gain on Sale of Invest Beg Bal Beg Bal End Bal End Bal Operating Expenses Beg Bal End Bal HARRISON IMPORTS HARRISON IMPORTS Income Statements For the Year Ended Year 1 Investment Securities Classified as Held-to- Maturity Trading Available- for-Sale 0 0 0 $ $ 0 $ 0 $ 0 erto meducation.com/ext/map/index.html?_con-congexternal_browser=0&launchUrl=https%253A%252F% Saved E Practice Questions HARRISON IMPORTS Balance Sheets As of December 31, Year 1 Held-to- Investment Securities Classified as Maturity Assets Trading Available for Sale 5 D$ OS 0 Total Assets Stockholders' Equity Total Stockholders' Equity 5 05 05 0 HARRISON IMPORTS statements of Cash Fiwe For the Year Ended Oncerter 11 Year Heidi HARRISON IMPORTS Statements of Cash Flows For the Year Ended December 31, Year 1 Held-to- Investment Securities Classified as Trading Maturity Cash flows from operating activities Available-for- Sale 0 Net cash flow from operating activities Cash flow from investing activities 0 Net cash flow from investing activities Cash flow from financing activities 0 0 Not cash flow from financing activities Net change in cash Ending cash balance S 0 $ 0 $ 0