American Surety and Fidelity buys and sells securities expecting to earn profits on short-term differences in price. For the first 11 months of 2016, gains from selling trading securities totaled $8 million, losses were $11 million, and the company had earned $5 million in investment revenue. The following selected transactions relate to American’s trading account during December 2016, and the first week of 2017. The company’s fiscal year ends on December 31. No trading securities were held by American on December 1, 2016. 2016 Dec. 12 Purchased FF&G Corporation bonds for $12 million. 13 Purchased 2 million Ferry Intercommunications common shares for $22 million. 15 Sold the FF&G Corporation bonds for $12.1 million. 22 Purchased U.S. Treasury bills for $56 million and Treasury bonds for $65 million. 23 Sold half the Ferry Intercommunications common shares for $10 million. 26 Sold the U.S. Treasury bills for $57 million. 27 Sold the Treasury bonds for $63 million. 28 Received cash dividends of $200,000 from the Ferry Intercommunications common shares. 31 Recorded any necessary adjusting entry(s) and closing entries relating to the investments. The market price of the Ferry Intercommunications stock was $10 per share. 2017 Jan. 2 Sold the remaining Ferry Intercommunications common shares for $10.2 million. 5 Purchased Warehouse Designs Corporation bonds for $34 million. Required: 1. Prepare the appropriate journal entry for each transaction or event during 2016, including the closing entry to income summary for the year. 2. Indicate any amounts that American would report in its 2016 balance sheet and income statement as a result of these investments. 3. Prepare the appropriate journal entry for each transaction or event during 2017. Assume the fair value of the Warehouse Designs bonds did not change during 2017.

Financial Accounting
14th Edition
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Carl Warren, Jim Reeve, Jonathan Duchac
Chapter15: Investments And Fair Value Accounting
Section: Chapter Questions
Problem 3PA
icon
Related questions
Question

American Surety and Fidelity buys and sells securities expecting to earn profits on short-term differences in price. For the first 11 months of 2016, gains from selling trading securities totaled $8 million, losses were $11 million, and the company had earned $5 million in investment revenue. The following selected transactions relate to American’s trading account during December 2016, and the first week of 2017. The company’s fiscal year ends on December 31. No trading securities were held by American on December 1, 2016. 2016 Dec. 12 Purchased FF&G Corporation bonds for $12 million. 13 Purchased 2 million Ferry Intercommunications common shares for $22 million. 15 Sold the FF&G Corporation bonds for $12.1 million. 22 Purchased U.S. Treasury bills for $56 million and Treasury bonds for $65 million. 23 Sold half the Ferry Intercommunications common shares for $10 million. 26 Sold the U.S. Treasury bills for $57 million. 27 Sold the Treasury bonds for $63 million. 28 Received cash dividends of $200,000 from the Ferry Intercommunications common shares. 31 Recorded any necessary adjusting entry(s) and closing entries relating to the investments. The market price of the Ferry Intercommunications stock was $10 per share. 2017 Jan. 2 Sold the remaining Ferry Intercommunications common shares for $10.2 million. 5 Purchased Warehouse Designs Corporation bonds for $34 million. Required: 1. Prepare the appropriate journal entry for each transaction or event during 2016, including the closing entry to income summary for the year. 2. Indicate any amounts that American would report in its 2016 balance sheet and income statement as a result of these investments. 3. Prepare the appropriate journal entry for each transaction or event during 2017. Assume the fair value of the Warehouse Designs bonds did not change during 2017.

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 6 steps with 6 images

Blurred answer
Knowledge Booster
Consolidations
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Financial Accounting
Financial Accounting
Accounting
ISBN:
9781305088436
Author:
Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning