Question

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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