Rose Company had no short-term investments prior to year 2013. It had the following transactions involving short-term investments in available-for-sale securities during 2013.
Apr. 16 Purchased 4,000 shares of Gem Co. stock at $25.75 per share plus a $400 brokerage fee.
May 1 Paid $160,000 to buy 90-day U.S. Treasury bills (debt securities): $160,000 principal amount, 5% interest, securities dated May 1.
July 7 Purchased 2,000 shares of PepsiCo stock at $49.00 per share plus a $370 brokerage fee.
July 20 Purchased 1,000 shares of Xerox stock at $15.00 per share plus a $450 brokerage fee.
Aug. 3 Received a check for principal and accrued interest on the U.S. Treasury bills that matured on July 29.
Aug.15 Received an $0.95 per share cash dividend on the Gem Co. stock.
Aug. 28 Sold 2,000 shares of Gem Co. stock at $32.50 per share less a $490 brokerage fee.
Oct. 1 Received a $2.00 per share cash dividend on the PepsiCo shares.
Dec. 15 Received a $1.10 per share cash dividend on the remaining Gem Co. shares.
Dec. 31 Received a $1.20 per share cash dividend on the PepsiCo shares.
1. Prepare journal entries to record the preceding transactions and events.
2. Prepare a table to compare the year-end cost and fair values of Perry’s short-term investments in available-for-sale securities. The year-end fair values per share are: Gem Co., $28.00; PepsiCo, $46.25; and Xerox, $12.00.
3. Prepare an adjusting entry, if necessary, to record the year-end fair value adjustment for the portfolio of short-term investments in available-for-sale securities.
1. Journal entries to record the preceding transactions and events.
| Date | Description | Debit $ | Credit $ |
| April 16 | Short Term Inv. AFS (GEM) | 103,400 | |
| TO cash
(Being Purchased 4,000 shares of Gem Co. stock at $25.75 per share plus a $400 brokerage fee |
403,400 | ||
| May 1 | Short Term Investments (Tbills) | 160,000 | |
| Cash | 160,000 | ||
| (Being Amount Paid $160,000 to buy 90-day U.S. Treasury bills (debt securities)) | |||
| July 7 | Short Term Investments AFS (Pepsi) | 98,370 | |
| To Cash | 97,370 | ||
| ( Being Purchased 2,000 shares of PepsiCo stock at $49.00 per share plus a $370 brokerage fee) | |||
| July 20 | Short Term Investments AFS (Xerox) | 15,450 | |
| To Cash | 15,450 | ||
| (Being Purchased 1,000 shares of Xerox stock at $15.00 per share plus a $450 brokerage fee) | |||
| Aug 3 | Cah | 168,000 | |
| Short Term Investments AFS (Tbills) | 160,000 | ||
| Interest Revenue | 8,000 | ||
| (Received a check for principal and accrued interest on the U.S. Treasury bills that matured on July 29 | |||
| Aug 15 | Cash | 3,800 | |
| Dividend Revenue | 3,800 | ||
| ( Being the amount Received an $0.95 per share cash dividend on the Gem Co. stock) (4000*.95) | |||
| Aug 28 | Cash | 64,510 | |
| Short Term Investments AFS (Gem) | 510,10 | ||
| Gain on sale of short term investments | 13,500 | ||
| (Sold 2,000 shares of Gem Co. stock at $32.50 per share less a $490 brokerage fee) | |||
| Oct 1 | Cash | 4,000 | |
| Dividend Revenue | 4,000 | ||
| (Received a $2.00 per share cash dividend on the PepsiCo shares) | |||
| Dec 15 | Cash | 2,200 | |
| To Dividend Revenue | 2,200 | ||
| (Received a $1.10 per share cash dividend on the remaining Gem Co. shares) | |||
| Dec 31 | Cash | 2,400 | |
| To devidend revenue | 2,400 | ||
| (Received a $1.20 per share cash dividend on the PepsiCo shares) |
2 A table to compare the year-end cost and fair values of Perry’s short-term investments in available-for-sale securities. The year-end fair values per share are: Gem Co., $28.00; PepsiCo, $46.25; and Xerox, $12.00.
| Company | Cost | Fair Vlue | Unrealized Gain |
| Gem Co | 51700 | 56000 | 4300 |
| Pepsi Co | 98370 | 92500 | -5870 |
| Xerox | 15450 | 12000 | -3450 |
| Total | 165520 | 160500 | -5020 |
| -10040 |
3 adjusting entry, to record the year-end fair value adjustment for the portfolio of short-term investments in available-for-sale securities
| No | Description | Debit | Credit |
| 1 | Unrealized Holding Gain or Loss–Equity (loss) | 10,040 | |
| Securities Fair Value Adjustment (AFS) | 10,040 |
