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Investments in Trading Securities Maxwell Company engaged in the following transactions involving short-term investments: a. Purchased 200 shares of Bartco stock for $12,800. b. Received a $1.60-per-share dividend on the Bartco stock. c. Sold 40 shares of the Bartco stock for $61 per share. d. Purchased 380 shares of Newton stock for $20,900. e. Received a dividend of $1.00 per share on the Newton stock. At December 31, the Bartco stock has a market value of $60 per share, and the Newton stock has a market value of $59 per share. Required: 1. Prepare entries for Maxwell’s journal to record these transactions assuming they are trading securities, 2. Calculate the market value of Maxwell’s short-term investment portfolio at December 31. 3. Prepare the necessary adjusting entry at December 31. 4. CONCEPTUAL CONNECTION What is the income statement effect of the adjusting entry? 5. How would these investments be reported on the December 31 balance sheet?

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
Publisher: Cengage Learning
ISBN: 9781337690881
BuyFind

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
Publisher: Cengage Learning
ISBN: 9781337690881

Solutions

Chapter
Section
Chapter A2, Problem 27E
Textbook Problem

Investments in Trading Securities

Maxwell Company engaged in the following transactions involving short-term investments:

a. Purchased 200 shares of Bartco stock for $12,800.

b. Received a $1.60-per-share dividend on the Bartco stock.

c. Sold 40 shares of the Bartco stock for $61 per share.

d. Purchased 380 shares of Newton stock for $20,900.

e. Received a dividend of $1.00 per share on the Newton stock.

At December 31, the Bartco stock has a market value of $60 per share, and the Newton stock has a market value of $59 per share.

Required:

1. Prepare entries for Maxwell’s journal to record these transactions assuming they are trading securities,

2. Calculate the market value of Maxwell’s short-term investment portfolio at December 31.

3. Prepare the necessary adjusting entry at December 31.

4. CONCEPTUAL CONNECTION What is the income statement effect of the adjusting entry?

5. How would these investments be reported on the December 31 balance sheet?

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Chapter A2 Solutions

Cornerstones of Financial Accounting
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