Question

Rose Company had no short-term investments prior to this year. It had the following transactions this year involving short-term stock investments with insignificant influence.

Apr.		16		Purchased 3,500 shares of Gem Co. stock at $24 per share.
July		7		Purchased 2,000 shares of PepsiCo stock at $49 per share.
		20		Purchased 1,000 shares of Xerox stock at $16 per share.
Aug.		15		Received a $1.00 per share cash dividend on the Gem Co. stock.
		28		Sold 2,000 shares of Gem Co. stock at $30 per share.
Oct.		1		Received a $2.50 per share cash dividend on the PepsiCo shares.
Dec.		15		Received a $1.00 per share cash dividend on the remaining Gem Co. shares.
		31		Received a $1.50 per share cash dividend on the PepsiCo shares.

• Purchased 3,500 shares of Gem Co. stock at $24 per share.

• 2

  Purchased 2,000 shares of PepsiCo stock at $49 per share.

• 3

  Purchased 1,000 shares of Xerox stock at $16 per share.

• 4

  Received a $1.00 per share cash dividend on the Gem Co. stock.

• 5

  Sold 2,000 shares of Gem Co. stock at $30 per share.

• 6

  Received a $2.50 per share cash dividend on the PepsiCo shares.

• 7

  Received a $1.00 per share cash dividend on the remaining Gem Co. shares.

• 8

  Received a $1.50 per share cash dividend on the PepsiCo shares.

• 2. Prepare a table to compare the year-end cost and fair values of Rose's short-term stock investments. The year-end fair values per share are Gem Co., $26; PepsiCo, $46; and Xerox, $13.

• 	Comparison of Cost and Fair Values for Stock Investments Portfolio at Year-End Cost Fair Value Unrealized Amount Gem Co. Pepsi Co. Xerox Total $0 $0

• Record the year-end adjustment entry for the securities portfolio as of deccember 31

Answer 1

Ques 1

Date	Accounts	debit	credit
Apr-16	short term investments-AFS (gem)	84000
	cash		84000
	3500*24
Jul-07	short term investments-AFS (pepsi)	98000
	cash		98000
	2000*49+
Jul-20	short term investments-AFS (xerox)	15000
	cash		15000
	1000*15+
Aug-15	Cash	3500
	Dividend revenue		3500
	3500*1
Aug-28	cash	60000
	2000*30
	short term investments-AFS (Gem)		48000
	2000*24
	Gain on sale of short term investments		12000
Oct-01	Cash	5000
	Dividend revenue		5000
	2.5*2000
Dec-15	Cash	1500
	Dividend revenue		1500
	1*(3500-2000)
Dec-31	Cash	3000
	Dividend revenue		3000
	1.5*2000

Ques 2

	Cost	fair value	unrealised amount	gain or loss
Gem co	36000	39000
Pepsi co	98000	92000
Xerox	15000	13000
Total	149000	144000	-5000	Unrealised loss
Working
(3500-2000)*24	36000
(3500-2000)*26	39000
2000*46	92000
1000*13	13000