Question

Protom Company, which began operations in 2009, invests its idle cash in trading securities. The following transactions are from its short-term investments in its trading securities.
2009
Jan. 20 Purchased 800 shares of Ford Motor Co. at $26 per share plus a $120 commission.
Feb. 9 Purchased 2,600 shares of Lucent at $39 per share plus a $578 commission.
Oct. 12 Purchased 800 shares of Z-Seven at $7.50 per share plus a $200 commission.
2010
Apr. 15 Sold 800 shares of Ford Motor Co. at $30 per share less a $300 commission.
July 5 Sold 800 shares of Z-Seven at $11 per share less a $103 commission.
July 22 Purchased 2,000 shares of Hunt Corp. at $39 per share plus a $444 commission.
Aug.19 Purchased 1,600 shares of Donna Karan at $19.50 per share plus a $290 commission.
2011
Feb. 27 Purchased 3,500 shares of HCA at $31 per share plus a $420 commission.
Mar. 3 Sold 2,000 shares of Hunt at $35 per share less a $250 commission.
June 21 Sold 2,600 shares of Lucent at $36.75 per share less a $420 commission.
June 30 Purchased 1,300 shares of Black & Decker at $47.50 per share plus a $595 commission.
Nov. 1 Sold 1,600 shares of Donna Karan at $19.50 per share less a $309 commission.
Required
1. Prepare journal entries to record these short-term investment activities for the years shown. (Ignore any year-end adjusting entries.)
2. On December 31, 2011, prepare the adjusting entry to record any necessary fair value adjustment for the portfolio of trading securities when HCA’s share price is $33 and Black & Decker’s share price is $43.50. (Assume the Fair Value Adjustment—Trading account had an unadjusted balance of zero.)


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  • CreatedMarch 18, 2015
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