Horngren's Accounting, Student Value Edition Plus MyAccountingLab with Pearson eText, Access Card Package
Horngren's Accounting, Student Value Edition Plus MyAccountingLab with Pearson eText, Access Card Package
11th Edition
ISBN: 9780134078946
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
Question
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Chapter 15, Problem P15.18APGA
To determine

Concept introduction: Investment should be classified between current and non-current assets on the basis of motive of investment. Some securities may be purchased for trading purpose or for held-to-maturity, so disclosure of each types of securities will be different.

Requirement 1;

To prepare: Classification of stock investment.

Main solution:

Balance Sheet (Partial)
Assets  
Current asset;  
Marketable Securities – Held as trading securities $37400
Marketable Securities – Held as trading securities $6000

To determine

Requirement 2;

To prepare:Journal entries for investment transactions.

Main solution:

Date Accounts Title Debit Credit
July2, 2016 Marketable Securities $37400  
  Cash   $37400
       
Aug. 21, 2016 Cash $1020  
  Dividend Revenue   $1020
       
Sep. 16, 201 Cash $50320  
  Marketable Securities   $37400
  Realized Gain on Trading Securities   $12920
       
Oct. 8, 2016 Marketable Securities $6000  
  Cash   $6000
       
Dec.31, 2016 Unrealized Holding Loss on Trading Securities $4000  
  Marketable Securities   $4000

To determine

Requirement 3;

To prepare: Preparation of T account and disclosure in the balance sheet at December 31, 2016.

Main solution:

Marketable Securities (Investment made in Bravo Inc.)
Debit Credit
Cash $37400 Cash $37400
       
  $37400   $37400
Marketable Securities (Investment made in Zigbo Inc.)
Debit Credit
Cash $6000 Unrealized holding loss on trading securities $4000
    Ending balance $2000
  $6000   $6000
Cash
Debit Credit
Marketable securities $50320 Marketable securities $37400
Dividend revenue $1020 Marketable securities $6000
    Ending balance $7940
  $51340   $51340
Main 4 You
Balance Sheet (Partial)
As at December 31, 2016
Assets  
Current asset;  
Cash $7940
Marketable Securities – Held as trading securities $2000

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