You are working for The Wellington Company on temporary assignment while one of the accountants is on family leave. You have been asked to review the companys investment journal entries and provide necessary information to the accountant preparing the financial statements. PAGE 8 JOURNALACCOUNTING EQUATION DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY 1 Jan. 17 Investments-Red Rock Co. Stock 38,500.00 2 Cash 38,500.00 3 Feb. 5 Investments-Sunset Village Bonds 35,000.00 4 Interest Receivable 300.00 5 Cash 35,300.00 6 23 Investments-Mays and Co. Stock 26,250.00 7 Cash 26,250.00 8 Mar. 31 Cash 350.00 9 Interest Receivable 300.00 10 Interest Revenue 50.00 11 Apr. 6 Investment in Minions Corp. Stock 175,000.00 12 Cash 175,000.00 13 30 Cash 750.00 14 Dividend Revenue 750.00 15 Jul. 1 Cash 18,690.00 16 Loss on Sale of Investment 2,520.00 17 Interest Revenue 210.00 18 Investments-Sunset Village Bonds 21,000.00 19 Aug. 14 Cash 41,300.00 20 Gain on Sale of Investments 1,800.00 21 Investments-Harding Construction Stock 39,500.00 22 27 Cash 3,500.00 23 Investment in Minions Corp. Stock 3,500.00 24 Sep. 22 Cash 29,750.00 25 Gain on Sale of Investments 3,500.00 26 Investments-Mays and Co. Stock 26,250.00 27 30 Cash 140.00 28 Interest Revenue 140.00 29 Nov. 1 Investment in Minions Corp. Stock 15,750.00 30 Income of Minions Corp. 15,750.00 31 Dec. 31 Unrealized Loss on Available-For-Sale Investments 3,275.00 32 Valuation Allowance for Available-For-Sale Investments 3,275.00 33 31 Valuation Allowance for Trading Investments 2,150.00 34 Unrealized Gain on Trading Investments 2,150.00 Review the journal entries on The Wellington Company panel then answer the following questions. 1. Which item is likely to be a trading security? Mays and Co. Correct Why? Because it was sold quickly. Correct 2. How are brokerage commission fees treated on stock sales vs. stock purchases? They are deducted from cash received or included in the stock cost. Correct 3. Based on these journal entries, what is the companys investment in Sunset Village bonds at the end of the year? $14,000 4. The journal entry on Aug. 27 most likely shows Dividend of Minions Corp. stock. Correct 5. As an investment, bonds are always categorized as none of these answers. Correct 6. What is the companys investment in Minions Corp. at the end of the year? $187,250 Points: 7 / 7 7. Which of the following investments are likely to be available-for-sale securities? Check all that apply. Sunset Village bonds Red Rock Co. stock Mays and Co. stock Minions Corp. stock Harding Construction stock Correct Cannot be determined Points: 1 / 1 The accountant preparing the financial statements has asked you to provide the fair value as of the end of the year for the investments. Present the information as it would be shown on the financial statements. Last year, The Wellington Company reported costs of $68,000 in trading investments and $82,000 in available-for-sale investments. Refer to the journal entries shown on The Wellington Company panel. Assume that all investments sold during this year were trading investments and that purchases during the year were new investments. 1. Select the correct label for each line and fill in the amount. In classifying the investments, choose a categorization which seems most likely, given the pattern of transactions in the journal entries. Enter all amounts as positive numbers. If an amount box does not require an entry, leave it blank. Trading Securities Trading investments at cost Correct $ Plus valuation allowance for trading investments Correct 2,150 Trading investments at fair value Correct.