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Intermediate Accounting: Reporting...
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Intermediate Accounting: Reporting...
Investments in Trading Securities During 2019, Francis Company decided to begin investing its idle cash in marketable securities. The information contained below relates to Francis’s 2019 marketable security transactions:
Required:
- 1. Record Francis’s investment transactions for 2019.
- 2. Show the items of income or loss on the trading investments Francis reports on its 2019 income statement.
- 3. Show the carrying value of Francis’s investment account on its December 31, 2019, balance sheet.
1.
Prepare the journal entry to record the investment transactions for 2019.
Investment: It refers to the process of using the currently held excess cash to earn profitable returns in future. The investments can be made in equity securities such as shares or debt securities such as bonds.
Prepare the journal entry to record the investment transactions for 2019.
| Date | Account Title and Explanation |
Debit ($) | Credit ($) |
| April 1, 2019 | Investment in trading securities | 50,000 | |
| Interest income | 1,500 | ||
| Cash | 51,500 | ||
| (To record the purchase of trading securities) | |||
| June 30, 2019 | Cash | 3,000 | |
| Interest income | 3,000 | ||
| (To record the receipt of the interest income) | |||
| November 1, 2019 | Investment in trading securities | 60,000 | |
| Interest income | 2,750 | ||
| Cash | 62,750 | ||
| (To record the additional investment made in trading securities) | |||
| December 1, 2019 | Cash | 3,300 | |
| Interest income |
2.
Show the items that would be reported as income or loss from the investment in the income statement.
3.
Show the way in which the investments items are reported in the 2019 balance sheet.
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