Question: During certain periods Yang Company invests its excess cash until

During certain periods, Yang Company invests its excess cash until it is needed.
During 2011 and 2012, Yang engaged in these transactions:
2011
Jan. 16 Invested $146,000 in 120-day U.S. Treasury bills that had a maturity value of $150,000.
Apr. 15 Purchased 10,000 shares of King Tools common stock at $40 per share and 5,000 shares of Mellon Gas common stock at $30 per share as trading securities.
May 16 Received maturity value of U.S. Treasury bills in cash.
June 2 Received dividends of $2.00 per share from King Tools and $1.50 per share from Mellon Gas.
30 Made year-end adjusting entry for trading securities. Market price per share for King Tools is $32; for Mellon Gas, it is $35.
Nov. 14 Sold all the shares of King Tools for $42 per share.
2012
Feb. 15 Purchased 9,000 shares of MKD Communications for $50 per share as a trading security investment.
Apr. 1 Invested $195,500 in 120-day U.S. Treasury bills that had a maturity value of $200,000.
June 1 Received dividends of $2.20 per share from Mellon Gas.
30 Made year-end adjusting entry for held-to-maturity securities.
30 Made year-end adjusting entry for trading securities. Market price per share for Mellon Gas is $35; for MKD Communications, it is $60.

REQUIRED
1. Prepare journal entries to record the preceding transactions, assuming that Yang’s fiscal year ends on June 30.
2. Show the balance sheet presentation of short-term investments on June 30, 2012.
3. Explain the following statement: Held-to-maturity and trading securities are opposites in terms of investment strategy and thus require opposite accounting treatments.




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  • CreatedSeptember 10, 2014
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