Rose Company had no short- term investments prior to year 2013. It had the following transactions involving

Question:

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 $24.25 per share plus a $180 brokerage fee.

May 1 Paid $ 100,000 to buy 90-day U. S. Treasury bills (debt securities): $ 100,000 principal amount, 6% interest, securities dated May 1.

July 7 Purchased 2,000 shares of PepsiCo stock at $ 49.25 per share plus a $ 175 brokerage fee.

20 Purchased 1,000 shares of Xerox stock at $ 16.75 per share plus a $ 205 brokerage fee.

Aug. 3 Received a check for principal and accrued interest on the U. S. Treasury bills that matured on July 29.

15 Received an $ 0.85 per share cash dividend on the Gem Co. stock.

28 Sold 2,000 shares of Gem Co. stock at $ 30 per share less a $ 225 brokerage fee.

Oct. 1 Received a $ 1.90 per share cash dividend on the PepsiCo shares.

Dec. 15 Received a $ 1.05 per share cash dividend on the remaining Gem Co. shares. 31 Received a $ 1.30 per share cash dividend on the PepsiCo shares.

Required

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 Rose’s short-term investments in available-for-sale securities. The year-end fair values per share are: Gem Co., $ 26.50; PepsiCo, $ 46.50; and Xerox, $ 13.75.

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.

Analysis Component

4. Explain the balance sheet presentation of the fair value adjustment for Rose’s short-term investments.

5. How do these short-term investments affect Rose’s?

(a) Income statement for year 2013

(b) The equity section of its balance sheet at year- end 2013?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...