The following information relates to the activity in the short-term investment account of Lido International, which held no short-term investments as of January 1.

1. January 28Purchased ten shares of Able Co. stock at $14 per share.

2. February 18Purchased twenty shares of Baker Co. stock at $26 per share.

3. March 15Received dividends from Able Co. of $1 per share.

4. April 29 Sold five shares of Able Co. for $15 per share.

5. May 18Received dividends from Baker Co. of $2 per share.

6. June 1 Sold five shares of Baker Co. for $22 per share.

7. June 30 Market value of Able shares is $17 per share.

Market value of Baker shares is $20 per share.

a. Prepare journal entries for each transaction, excluding the June 30 adjusting entry. Use the asset account “Short-Term Investments,” and assume that dividends were declared and paid on the same day.

b. Prepare the June 30 adjusting entry, and describe the effect on reported income, assuming that:

(1) Able and Baker shares are both considered trading securities;

(2) Able is considered a trading security, and Baker is considered an available-for-sale security;

(3) Able is considered an available-for-sale security, and Baker is considered a trading security; and

(4) Both Able and Baker are considered available-for-sale securities.

(c)Which combination in (b) depicts management as most successful in the current period? Explain.