Question

During the first quarter of 2019, Payne Corporation entered into the following transactions:

Jan. 1	Acquired 150 shares of Block Corporation common stock for $20 per share, 200 shares of Bridle Corporation common stock for $30 per share, and 100 shares of Alpha Corporation common stock for $25 per share. These are the only shares the company owns.
Feb. 1	Purchased 12% Atom Company bonds with a face value of $20,000 at par, plus accrued interest. Interest on the bonds is payable February 28 and August 31 each year, and the bonds are due August 31, 2019. Also purchased 10% Bradford Company bonds with a face value of $12,000 at par, plus accrued interest. Interest on the bonds is payable March 31 and September 30, and the bonds are due September 30, 2022. These are the only bonds the company owns and all are classified as available-for-sale securities.
Feb. 1	Established a petty cash fund for incidental expenditures at $500.
Feb. 28	Received the semiannual interest on the Atom Company bonds.
Feb. 28	A count of cash on hand indicated that $125.50 remained in the petty cash fund. A sorting of petty cash vouchers disclosed that $110.00 was spent for postage, $170.65 was spent for office supplies, $45.00 was spent for transportation, and $43.50 was spent for miscellaneous items. The fund was replenished.
Mar. 31	Received first quarter dividends of $1,500 and the semiannual interest on the Bradford Company bonds.
Mar. 31	The fair value of Payne’s equity securities is $10,200 and the fair value of its available-for-sale securities is $32,400.
Mar. 31	A count of cash on hand indicated that $230.50 remained in the petty cash fund. A sorting of petty cash vouchers disclosed that $140.00 was spent for postage, $75.30 was spent for office supplies, and $54.20 was spent for miscellaneous items. The fund was replenished.

The bank statement and the accounting records of Payne for the month of March 2019 indicated that the cash collected from the dividends and the Bradford Company bond interest was deposited on March 31 but did not appear on the March bank statement. There were no other deposits in transit. The bank statement showed a balance on March 31 of $13,459.75, which included collection of a $1,500 note and $100 of interest by the bank for Payne. Also listed was a $20 bank service charge and a $75.60 NSF check returned by the bank. The cash balance per the accounting records on March 31 was $11,689.95, which included checks totaling $2,365.40 that had not yet cleared the bank.

Required:

1.	Prepare journal entries to record the preceding transactions of Payne for the first quarter of 2019.
2.	Prepare a bank reconciliation for Payne for March 31, 2019.
3.	Prepare any journal entries necessary to adjust Payne’s books on March 31, 2019.

Answer 1

1.

Date	General Journal	Debit	Credit
Jan. 1, 2019	Investment in equity securities*	11500
	Cash		11500
	(To record purchase of equity securities)
Feb. 1, 2019	Investment in available-for-sale debt securities**	32000
	Interest receivable***	1400
	Cash		33400
	(To record purchase of debt securities)
Feb. 1, 2019	Petty cash	500
	Cash		500
	(To record the establishment of petty cash fund)
Feb. 28, 2019	Cash ($20000 x 12% x 6/12)	1200
	Interest receivable		1000
	Interest revenue ($20000 x 12% x 1/12)		200
	(To record semi-annual interest received)
Feb. 28, 2019	Postage expense	110.00
	Office supplies expense	170.65
	Transportation expense	45.00
	Miscellaneous expense	43.50
	Cash short and over	5.35
	Cash		374.50
	(To record the replenishment of petty cash fund)
Mar. 31, 2019	Cash [$1500 + ($12000 x 10% x 6/12)]	2100
	Interest receivable		400
	Dividend revenue		1500
	Interest revenue ($12000 x 10% x 2/12)		200
	(To record interest and dividend received)
Mar. 31, 2019	Unrealized holding gain or loss-NI	1300
	Investment in equity securities ($11500 - $10200)		1300
	(To record equity securities at fair value)
Mar. 31, 2019	Fair value adjustment ($32400 - $32000)	400
	Unrealized holding gain or loss-OCI		400
	(To record available-for sale debt securities at fair value)
Mar. 31, 2019	Postage expense	140.00
	Office supplies expense	75.30
	Miscellaneous expense	54.20
	Cash		269.50
	(To record the replenishment of petty cash fund)

Working:

*Investment in equity securities:
Block Corporation (150 x $20)	3000
Bridle Corporation (200 x $30)	6000
Alpha Corporation (100 x $25)	2500
	11500
**Investment in available-for-sale debt securities:
Atom Company	20000
Bradford Company	12000
	32000
***Interest receivable:
Atom Company ($20000 x 12% x 5/12)	1000
Bradford Company ($12000 x 10% x 4/12)	400
	1400

2.

Payne Corporation
Bank Reconciliation Statement
March 31
Balance as per bank statement		13459.75
Add: Deposits in transit		2100.00
		15559.75
Less: Outstanding checks		2365.4
Adjusted balance		13194.35
Balance as per books		11689.95
Add: Note and interest collected by bank		1600.00
		13289.95
Less:
NSF check	75.60
Bank service charge	20.00	95.60
Adjusted balance		13194.35

3.

Date	General Journal	Debit	Credit
Mar. 31, 2019	Cash	1600.00
	Notes receivable		1500.00
	Interest revenue		100.00
	(To record note and interest collected by bank)
Mar. 31, 2019	Accounts receivable	75.60
	Cash		75.60
	(To record NSF check)
Mar. 31, 2019	Miscellaneous expense	20.00
	Cash		20.00
	(To record bank service charges)