Financial Accounting: Tools for Business Decision Making, 8th Edition
8th Edition
ISBN: 9781118953808
Author: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso
Publisher: WILEY
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter AH, Problem H.4BE
To determine
Trading securities: It refers to the buying and selling of short-term debt or equity securities to generate profits in the current period.
To Prepare: the
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
At December 31, 2018, Charlotte Company has an equity portfolio valued at $160,000. Its cost was $132,000. If the Securities Fair Value Adjustment has a debit balance of $8,000, which of the following journal entries is required at December 31, 2018?
Lexington Co. has the following securities outstanding on December 31, 2017 (its first year of operations).
Â
Cost
Fair Value
Greenspan Corp. stock
$20,000
$19,000
Summerset Company stock
9,500
8,800
Tinkers Company stock
20,000
20,600
Â
$49,500
$48,400
During 2018, Summerset Company stock was sold for $9,200, the difference between the $9,200 and the “fair value” of $8,800 being recorded as a “Gain on Sale of Investments.” The market price of the stock on December 31, 2018, was Greenspan Corp. stock $19,900; Tinkers Company stock $20,500.Instructions(a) What justification is there for valuing equity securities at fair value and reporting the unrealized gain or loss as part of net income?(b) How should Lexington Co. report this information in its financial statements at December 31, 2017? Explain.(c) Did Lexington Co. properly account for the sale of the Summerset Company stock? Explain.(d) Are there any additional entries necessary for Lexington Co. at December 31,…
At December 31, 2018, Atlanta Company has an equity portfolio valued at $160,000. Its cost was $132,000. If the Securities Fair Value Adjustment has a debit balance of $8,000, prepare the journal entry required at December 31, 2018.
Chapter AH Solutions
Financial Accounting: Tools for Business Decision Making, 8th Edition
Ch. AH - Prob. 1QCh. AH - Prob. 2QCh. AH - Prob. 3QCh. AH - Prob. 4QCh. AH - What is the cost of an investment in stock?Ch. AH - Prob. 6QCh. AH - Prob. 7QCh. AH - Prob. 8QCh. AH - Prob. 9QCh. AH - Distinguish between the cost and equity methods of...
Ch. AH - What are consolidated financial statements?Ch. AH - What are the valuation guidelines for trading and...Ch. AH - Prob. 13QCh. AH - Prob. 14QCh. AH - Prob. 15QCh. AH - Prob. 16QCh. AH - Prob. 17QCh. AH - Prob. 18QCh. AH - Prob. H.1BECh. AH - Prob. H.2BECh. AH - Prob. H.3BECh. AH - Prob. H.4BECh. AH - Prob. H.5BECh. AH - Prob. H.6BECh. AH - Prob. H.7BECh. AH - Prob. H.8BECh. AH - Prob. H.1ECh. AH - Prob. H.2ECh. AH - Prob. H.3ECh. AH - Prob. H.4ECh. AH - Prob. H.5ECh. AH - Prob. H.6ECh. AH - Prob. H.7ECh. AH - Prob. H.8ECh. AH - Prob. H.1PCh. AH - Prob. H.2PCh. AH - Prob. H.3PCh. AH - Prob. H.4PCh. AH - Prob. H.5PCh. AH - Prob. H.6P
Knowledge Booster
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
- During 2021, Anthony Company purchased debt securities as a long-term investment and classified them as trading. All securities were purchased at par value. Pertinent data are as follows: The net holding gain or loss included in Anthonys income statement for the year should be: a. 0 b. 3,000 gain c. 9,000 loss d. 12,000 lossarrow_forwardMarigold Company in its first year of operations provides the following information related to one of its available-for-sale debt securities at December 31, 2020. Amortized cost  $51,100 Fair value  42,200 Expected credit losses  12,600 A. What is the amount of credit loss that marigold should report on this available-for-sale security at december 31, 2020? Amount of the credit loss $ 8,900 B. Prepare the journal entry to record the credit loss, if any ( and other adjustments needed), at December 31, 2020? date       account titles and explanations      debit      credit 12/31/20                                  8,900                                                     8,900 Please note that the answer is NOT Debit Loss on available for sale debt securities and Credit avilable for sale debt securities. These are the account titles I can choose from... Accumulated Other…arrow_forwardAt December 31, 2021, Blossom Company has an equity portfolio valued at $121000. Its cost was $106000. If the Securities Fair Value Adjustment has a debit balance of $6700, which of the following journal entries is required at December 31, 2021?arrow_forward
- Tamarisk Company in its first year of operations provides the following information related to one of its available-for-sale debt securities at December 31, 2020. Amoortization cost $52,100 Fair Value 44,200 Expected credit losses 12,850  What is the amount of the credit loss that Tamarisk should report on this available-for-sale security at December 31, 2020? Prepare the journal entry to record the credit loss, if any (and any other adjustment needed), at December 31, 2020. Assume that the fair value of the available-for-sale security is $57,200 at December 31, 2020, instead of $44,200. What is the amount of the credit loss that Tamarisk should report at December 31, 2020? Assume the same information as for part (c). Prepare the journal entry to record the credit loss, if necessary (and any other adjustment needed), at December 31, 2020.arrow_forwardAt December 31, 2022, available-for-sale debt securities for Storrer, Inc. are as follows. The securities are considered to be a long-term investment. Security.   Cost.    Fair Value A        $17,500    16,000 B        12,500    14,000 C        23,000     21,000           53,000     51,000 A. Prepare the adjusting entry at December 31, 2022 to report the securities at fair value. B- Show the statement presentation at December 31,2022, after adjustment to fair value. C- E. Kretsinger, a member of the board of directors, does not understand the reporting of the unreal- ized gains or losses. Write a letter to Ms. Kretsinger explaining the reporting and the purposes that it serves.arrow_forwardTerra Cotta Company has the following data at December 31, 2020 for its securities: Security  Cost  Fair Value Available-for-sale  $34,000  $39,000 Trading  46,000  42,000 Journalize the December 31 adjusting entries. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Dec. 31         (To record available-for-sale securities)   Dec. 31         (To record trading securities)arrow_forward
- Lexington Co. has the following securities outstanding on December 31, 2020 (its first year of operations).   Cost  Fair Value Greenspan Corp. stock  $20,000  $19,000 Summerset Company stock  9,500  8,800 Tinkers Company stock   20,000   20,600   $49,500  $48,400  During 2021, Summerset Company stock was sold for $9,200, the difference between the $9,200 and the “fair value” of $8,800 being recorded as a “Gain on Sale of Investments.” The market price of the stock on December 31, 2021, was Greenspan Corp. stock $19,900; Tinkers Company stock $20,500. Instructions  a. What justification is there for valuing equity securities at fair value and reporting the unrealized gain or loss as part of net income?  b. How should Lexington Co. report this information in its financial statements at December 31, 2020? Explain.  c. Did Lexington Co. properly account for the sale of the Summerset Company stock? Explain.  d. Are there any additional entries necessary for…arrow_forward(Equity Securities Entries and Disclosures) Parnevik Company has the following securities in its investment portfolio on December 31, 2017 (all securities were purchased in 2017): (1) 3,000 shares of Anderson Co. common stock which cost $58,500, (2) 10,000 shares of Munter Ltd. common stock which cost $580,000, and (3) 6,000 shares of King Company preferred stock which cost $255,000. The Fair Value Adjustment account shows a credit of $10,100 at the end of 2017.In 2018, Parnevik completed the following securities transactions.1. On January 15, sold 3,000 shares of Anderson’s common stock at $22 per share less fees of $2,150.2. On April 17, purchased 1,000 shares of Castle’s common stock at $33.50 per share plus fees of $1,980.On December 31, 2018, the market prices per share of these securities were Munter $61, King $40, and Castle $29. In addition, the accounting supervisor of Parnevik told you that, even though all these securities have readily determinable fair values, Parnevik will…arrow_forwardAt December 31, 2020, the available-for-sale debt portfolio for Cheyenne Corp. is as follows. Securities  Cost  Fair Value  Unrealized Gain(Loss) Good Co. Bonds  $28,800  $26,600  $(2,200 ) Home Co. Bonds  31,700  33,700  2,000  Grand Inc. Debentures  36,700  37,800  1,100    97,200  98,100  900  Before an adjusting entry on December 31, 2020, the fair value adjustment account contained a credit balance of $470. CheyenneCorp. reported net income of $80,100 for 2020.   Prepare the adjusting entry at December 31, 2020, to report the portfolio at fair value. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit…arrow_forward
- ) On October 1, 2018, North Co. invested excess cash of $80,000 by purchasing bonds of South Inc. At year-end, December 31, 2018, the market price of the bonds was $77,000. The investment is categorized as a trading debt investment. Journalize the adjusting entry needed at December 31, 2018. Omit explanationarrow_forwardKristopher Company began operations in 2014. At 12/31/22, Kristopher had a debit balance of $25,000 in its Allowance for Adjustment to Market.  At January 1, 2022, Kristopher owned the following securities, accounted for using the fair value method.    Cost MJO Common (25,000 shares)  $550,000 JKH Preferred (1,900 shares)  199,500 EKH Common (7,500 shares)  82,500             During 2022 the following events occurred:  4/3/22             Sold 3,000 shares of MJO for $75,000. 9/6/22             Acquired 1,500 shares of WVO Common for $25 per share.  At 12/31/22, the fair values for Kristopher’s securities were:             MJO Common, $24 per share            JKH Preferred, $103 per share            EKH Common, $13 per share            WVO Common, $27 per share  Required:  Prepare any journal entries required in 2022 to record the securities activity, including any required adjusting entries at 12/31/22. Show any calculations.…arrow_forwardDuring 2017, Latvia Company purchased trading securities with the following cost and market value on December 31, 2017.            Security                                           Cost                                      Market Value            A – 1 000 shares                      200 000                                       300 000            B – 10 000 shares                 1 700 000                                    1 600 000            C – 20 000 shares                 3 100 000                                     2 900 000                                                                5 000 000                                    4 800 000 The entity sold 10 000 shares of security B on January 15, 2018, for P 150 per share.                        1. What amount of unrealized gain or loss should be reported in income statement for 2017?                        2. What amount should be reported as loss on sale of trading investment of 2018?arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Financial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Financial Accounting
Accounting
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Cengage Learning
Financial instruments products; Author: fi-compass;https://www.youtube.com/watch?v=gvxozM3TUIg;License: Standard Youtube License