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 company’s investment journal entries and provide necessary information to the accountant preparing the financial statements. PAGE 8 JOURNAL DATE DESCRIPTION POST. REF. DEBIT CREDIT 1 Jan. 17 Investment-Red Rock Co. Stock 40,700.00 2 Cash 40,700.00 3 Feb. 5 Investment-Sunset Village Bonds 37,000.00 4 Interest Receivable 320.00 5 Cash 37,320.00 6 23 Investment-Mays and Co. Stock 27,750.00 7 Cash 27,750.00 8 Mar. 31 Cash 370.00 9 Interest Receivable 320.00 10 Interest Revenue 50.00 11 Apr. 6 Investment in Minions Corp. Stock 185,000.00 12 Cash 185,000.00 13 30 Cash 750.00 14 Dividend Revenue 750.00 15 Jul. 1 Cash 19,746.00 16 Loss on Sale of Investments 2,664.00 17 Interest Revenue 210.00 18 Investment-Sunset Village Bonds 22,200.00 19 Aug. 14 Cash 41,300.00 20 Gain on Sale of Investments 1,800.00 21 Investment-Harding Construction Stock 39,500.00 22 27 Cash 3,700.00 23 Investment in Minions Corp. Stock 3,700.00 24 Sep. 22 Cash 31,250.00 25 Gain on Sale of Investments 3,500.00 26 Investment-Mays and Co. Stock 27,750.00 27 30 Cash 160.00 28 Interest Revenue 160.00 29 Nov. 1 Investment in Minions Corp. Stock 16,650.00 30 Income of Minions Corp. 16,650.00 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 X Investments Review the journal entries on The Wellington Company panel then answer the questions below. 1. Which item is likely to be a trading security? Mays and Co. Why? Because it was sold quickly 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 3. Based on these journal entries, what is the company’s investment in Sunset Village bonds at the end of the year?
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 company’s investment journal entries and provide necessary information to the accountant preparing the financial statements. PAGE 8 JOURNAL DATE DESCRIPTION POST. REF. DEBIT CREDIT 1 Jan. 17 Investment-Red Rock Co. Stock 40,700.00 2 Cash 40,700.00 3 Feb. 5 Investment-Sunset Village Bonds 37,000.00 4 Interest Receivable 320.00 5 Cash 37,320.00 6 23 Investment-Mays and Co. Stock 27,750.00 7 Cash 27,750.00 8 Mar. 31 Cash 370.00 9 Interest Receivable 320.00 10 Interest Revenue 50.00 11 Apr. 6 Investment in Minions Corp. Stock 185,000.00 12 Cash 185,000.00 13 30 Cash 750.00 14 Dividend Revenue 750.00 15 Jul. 1 Cash 19,746.00 16 Loss on Sale of Investments 2,664.00 17 Interest Revenue 210.00 18 Investment-Sunset Village Bonds 22,200.00 19 Aug. 14 Cash 41,300.00 20 Gain on Sale of Investments 1,800.00 21 Investment-Harding Construction Stock 39,500.00 22 27 Cash 3,700.00 23 Investment in Minions Corp. Stock 3,700.00 24 Sep. 22 Cash 31,250.00 25 Gain on Sale of Investments 3,500.00 26 Investment-Mays and Co. Stock 27,750.00 27 30 Cash 160.00 28 Interest Revenue 160.00 29 Nov. 1 Investment in Minions Corp. Stock 16,650.00 30 Income of Minions Corp. 16,650.00 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 X Investments Review the journal entries on The Wellington Company panel then answer the questions below. 1. Which item is likely to be a trading security? Mays and Co. Why? Because it was sold quickly 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 3. Based on these journal entries, what is the company’s investment in Sunset Village bonds at the end of the year?
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 12MCQ: When the market value of a companys available-for-sale securities is lower than its cost, the...
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Question
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 company’s investment journal entries and provide necessary information to the accountant preparing the financial statements.
PAGE 8
JOURNAL
| DATE | DESCRIPTION | POST. REF. | DEBIT | CREDIT | |
|---|---|---|---|---|---|
|
1
|
Jan. 17
|
Investment-Red Rock Co. Stock
|
|
40,700.00
|
|
|
2
|
|
Cash
|
|
|
40,700.00
|
|
3
|
Feb. 5
|
Investment-Sunset Village Bonds
|
|
37,000.00
|
|
|
4
|
|
Interest Receivable
|
|
320.00
|
|
|
5
|
|
Cash
|
|
|
37,320.00
|
|
6
|
23
|
Investment-Mays and Co. Stock
|
|
27,750.00
|
|
|
7
|
|
Cash
|
|
|
27,750.00
|
|
8
|
Mar. 31
|
Cash
|
|
370.00
|
|
|
9
|
|
Interest Receivable
|
|
|
320.00
|
|
10
|
|
Interest Revenue
|
|
|
50.00
|
|
11
|
Apr. 6
|
Investment in Minions Corp. Stock
|
|
185,000.00
|
|
|
12
|
|
Cash
|
|
|
185,000.00
|
|
13
|
30
|
Cash
|
|
750.00
|
|
|
14
|
|
Dividend Revenue
|
|
|
750.00
|
|
15
|
Jul. 1
|
Cash
|
|
19,746.00
|
|
|
16
|
|
Loss on Sale of Investments
|
|
2,664.00
|
|
|
17
|
|
Interest Revenue
|
|
|
210.00
|
|
18
|
|
Investment-Sunset Village Bonds
|
|
|
22,200.00
|
|
19
|
Aug. 14
|
Cash
|
|
41,300.00
|
|
|
20
|
|
Gain on Sale of Investments
|
|
|
1,800.00
|
|
21
|
|
Investment-Harding Construction Stock
|
|
|
39,500.00
|
|
22
|
27
|
Cash
|
|
3,700.00
|
|
|
23
|
|
Investment in Minions Corp. Stock
|
|
|
3,700.00
|
|
24
|
Sep. 22
|
Cash
|
|
31,250.00
|
|
|
25
|
|
Gain on Sale of Investments
|
|
|
3,500.00
|
|
26
|
|
Investment-Mays and Co. Stock
|
|
|
27,750.00
|
|
27
|
30
|
Cash
|
|
160.00
|
|
|
28
|
|
Interest Revenue
|
|
|
160.00
|
|
29
|
Nov. 1
|
Investment in Minions Corp. Stock
|
|
16,650.00
|
|
|
30
|
|
Income of Minions Corp.
|
|
|
16,650.00
|
|
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
|
X
Investments
Review the journal entries on The Wellington Company panel then answer the questions below.
| 1. | Which item is likely to be a trading security? Mays and Co. Why? Because it was sold quickly |
| 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 |
| 3. | Based on these journal entries, what is the company’s investment in Sunset Village bonds at the end of the year?
|
| 4. | The |
| 5. | As an investment, bonds are always categorized as none of these answers |
| 6. | What is the company’s investment in Minions Corp. at the end of the year?
|
7. Which of the investments below are likely to be available-for-sale securities? Check all that apply.
Cannot be determined
Harding Construction stock
Mays and Co. stock
Red Rock Co. stock
Minions Corp. stock
Sunset Village bonds
X
Financial Statements and Valuation
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.
Transcribed Image Text:m. in classifying the
Enter all amounts as positive numbers. If an amount box does not require an entry, leave it blank.
1. Select the
each me and the
Trading Securities
Trading investments at cost
Plus valuation allowance for trading investments
Trading investments at fair value
$
$
Available-For-Sale Securities
Available-for-sale investments at cost
Less valuation allowance for available-for-sale investments
Available-for-sale investments at fair value
$
$
2,150
3,275
S MOST Hkely, give the pat
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