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

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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