Sparta Investments Ltd. had the following short-term investments in marketable securities at fair value at December 31,
Question:
Sparta Investments Ltd. had the following short-term investments in marketable securities at fair value at December 31, 2019:
Alberta Energy Co. ............................... $310,000
Finning Ltd. ............................................. 180,000
Canadian National Railway ................... 285,000
Total short-term investments ............ $775,000
Sparta Investments Ltd. had the following investment transactions during 2020:
Jan. 5 Purchased 5,000 shares (2 percent) of HHN Ltd. as a short-term investment. The shares were purchased at $51.00 and the brokerage commission was $500.
31 HHN Ltd. reported net income of $7,000,000 and declared a cash dividend of $2,100,000.
Feb. 15 Received $42,000 from HHN Ltd. as a cash dividend.
Apr. 1 Purchased $400,000 (face value) of bonds at 99 as a long-term investment. The bonds pay 5 percent interest (2.5 percent semiannually) on October 1 and April 1. Sparta Investments Ltd. plans to hold the bonds until maturity in two years. The company uses the straight-line method to amortize the discount.
Aug. 31 Received a 10 percent stock dividend from HHN Ltd.
Oct. 1 Received the interest on the bonds.
Nov. 1 HHN Ltd. declared and distributed a 2-for-1 stock split.
Dec. 15 Sold 4,000 shares of HHN Ltd. for $28.00 per share. The brokerage commission was $1,500.
31 Recorded the adjustment for accrued interest on the bonds.
31 The fair values of the investments were as follows:
Alberta Energy Co. ........................................ $ 280,000
Finning Ltd. ....................................................... 187,000
Canadian National Railway ............................. 290,000
HHN Ltd ............................................................ 288,000
Total short-term investments ................... $1,045,000
Required
Prepare the general journal entries required to record the transactions of 2020.
Step by Step Answer:
Horngrens Accounting
ISBN: 9780135359785
11th Canadian Edition Volume 2
Authors: Tracie Miller Nobles, Brenda Mattison, Ella Mae Matsumura, Carol A. Meissner, Jo Ann Johnston, Peter R. Norwood