In January, 1996, the management of the Mead Company concludes that it has sufficient cash to permit
Question:
In January, 1996, the management of the Mead Company concludes that it has sufficient cash to permit some temporary investments in debt and stock securities. During the year, the following transactions occurred:
Feb. 1 Purchased 600 shares of CBF common stock for \(\$ 31,800\) plus brokerage fees of \(\$ 600\).
Mar. 1 Purchased 800 shares of RSD common stock for \(\$ 20,000\) plus brokerage fees of \(\$ 400\).
Apr. 1 Purchased \(50 \$ 1,000,12 \%\) MRT bonds for \(\$ 50,000\) plus \(\$ 1,000\) brokerage fees. Interest is payable semiannually on April 1 and October 1.
July 1 Received a cash dividend of \(\$ .60\) per share on the CBF common stock.
Aug. 1 Sold 200 shares of CBF common stock at \(\$ 56\) per share less brokerage fees of \(\$ 200\).
Sept. 1 Received a \(\$ 1\) per share cash dividend on the RSD common stock.
Oct. 1 Received the semiannual interest on the MRT bonds.
Oct. 1 Sold the MRT bonds for \(\$ 51,000\) less \(\$ 1,000\) brokerage fees.
At December 31, the fair value of the CBF and RSD common stocks were \(\$ 55\) and \(\$ 24\) per share, respectively.
\section*{Instructions}
(a) Journalize the transactions and post to the accounts Debt Investments and Stock Investments. (Use the T-account form.)
(b) Prepare the adjusting entry at December 31, 1996, to report the investment securities at fair value. All securities are considered to be trading securities.
(c) Show the balance sheet presentation of investment securities at December 31, 1996.
(d) Identify the income statement accounts and give the statement classification of each account.
Step by Step Answer:
Financial Accounting
ISBN: 9780471169208
2nd Edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso