Question
XYZ Co. has the following securities in its investment portfolio on December 31, 2019. All these securities were purchased in 2019. 700 shares of Segura
XYZ Co. has the following securities in its investment portfolio on December 31, 2019. All these securities were purchased in 2019.
700 shares of Segura Corporation common shares, which cost $39,200 and had a fair value of $42,000 at the end of 2019. XYZ Co. accounts for this investment as a special irrevocable election as FVOCI.
9,000 shares of Zcom Inc. common stock, which cost $378,000 and had a fair value of $389,000 at the end of 2019. XYZ Co. accounts for this investment as a special irrevocable election as FVOCI.
Gulf Corp. 5% bonds, $400,000 par value, purchased for $411,100; amortized cost was $407,544 at the end of 2019. The market interest rate had been 4% when the bond was acquired, and interest is paid annually at the end of each year. XYZ Co. accounts for this investment at amortized cost.
In 2020, the following transactions occurred:
May 4 : Purchased 3,000 shares of Dylex Corporation for $58 per share. XYZ Co. accounts for this investment as FVNI.
June 1 : A dividend of $5 per share was received on the Segura Corporation shares.
July 25 : Sold the Zcom Inc. shares for $383,000.
September 23 : 350 Segura Corporation shares were then sold for $23,000.
December 31 : The annual interest was received on the Gulf Corp. bond; interest revenue is measured using the effective-interest method.
December 31 : Market values at the end of the year: Segura Corporation, $62 per share, Zcom Inc., $39 per share, and Dylex Corporation, $60 per share.
Prepare journal entries for the 2020 transactions and events. The company records dividends, interest income, amortization and holding gains (losses) separately to facilitate income tax preparation. For the sales transactions of FVOCI investments, use the methodology as shown in textbook, FVOCI Investment in Shares. Please make sure your final answer(s) are accurate to the nearest whole number. Enter an appropriate description when entering the transactions in the journal. Dates must be entered in the format dd/mmm (ie. January 15 would be 15/Jan).
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