Holly Company invests its excess cash in marketable securities. At the beginning of 2016, it had the
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Question:
Security | Cost | 12/31/15 Fair Value |
---|---|---|
400 shares of Igor Company common stock | $8,400 | $9,400 |
700 shares of Ozone Company common stock | 23,100 | 21,700 |
Totals | $31,500 | $31,100 |
During 2016, the following transactions occurred:
Mar. 31 | Purchased Union Company 8% bonds with a face value of $10,000 for $10,000 plus accrued interest; interest is payable on the bonds each June 30 and December 31. |
May 17 | Sold 200 shares of Ozone Company common stock for $30 per share. |
June 30 | Received the semiannual interest on the Union Company bonds. |
Oct. 12 | Sold 100 shares of Igor Company common stock for $24 per share. |
Dec. 31 | Received the semiannual interest on the Union Company bonds and dividends of $1 per share and $1.50 per share on the Igor and Ozone Company common stock, respectively. |
The December 31 closing market prices were as follows: Igor Company common stock, $25 per share; Ozone Company common stock, $31 per share; Union Company 8% bonds, 101.
Required:
1. | Prepare journal entries to record the preceding information. |
2. | Show what is reported on Holly’s 2016 income statement. |
3. | Assuming the investment in Igor Company stock is considered to be a current asset and the remaining investments are noncurrent, show how all the items are reported on Holly’s December 31, 2016, balance sheet. |
4. | If GAAP required that unrealized holding gains and losses on available-for-sale securities be included in income, how much would Holly recognize in 2016? |
Related Book For
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
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