Question

Plankton Corporation had the following transactions related to short-term investments during 2019: 1. Purchased 9,000 shares of Gary Preferred Stock for $42.80 per share plus $1,800 of broker's fees. 2. Purchased a $70,000, 6%, 10 year bond of Karen Corporation for $74,000 cash. Interest is paid semi-annually. 3. Received an $0.80 per share cash dividend on the Gary Preferred Stock. 4. Sold 4,000 shares of Gary Preferred Stock for $46 per share less $500 broker's fees. 5. Received a semi-annual interest payment from Karen Corporation. Prepare the required journal entries to record these transactions in the attached workpaper. You do not have to make an entry here at wileyplus for

Answer 1

A.	Date	Account titles					DR	CR
	1	Marketable securities			(9000*42.80)+1800		387000
		Cash						387000
		(Purchased 9000 shares of Gary preferred stock)
	2	Marketable securities					74000
		Cash						74000
		(Purchased bond of Karen corporation)
	3	Cash			(9000*0.80)		7200
		Dividend revenue						7200
		(Received cash dividend on Gary preferred stock)
	4	Cash			(4000*46)-500		183500
		Marketable securities			(Note:1)			172000
		Realized gain or loss on sale of marketable securities						11500
		(Sold 4000 shares of Gary preferred stock)
	5	Cash			(70000*6%*1/2)		2100
		Interest revenue						2100
		(Received semi-annual interest payment from bond)
	Note:1
	Purchased 9000 shares of Gary preferred stock for $ 387000
	Cost per share=387000/9000=$43
	Cost of preferred shares sold=4000*43=$ 172000
	Sales consideration for 4000 shares=$ 183500
	Gain on sale=183500-172000=$ 11500
B.		Cash					Marketable securities
	Ref.	Debit	Ref.	Credit		Ref.	Debit	Ref.	Credit
	3	7200	1	387000		1	387000	4	172000
	4	183500	2	74000		2	74000
	5	2100
		Dividend revenue					Adjustment to market
	Ref.	Debit	Ref.	Credit		Ref.	Debit	Ref.	Credit
			3	7200		6	13500
		Interest revenue				Unrealized gain on valuation of stock investments
	Ref.	Debit	Ref.	Credit		Ref.	Debit	Ref.	Credit
			5	2100				6	12500
	Realized gain or loss on sale of marketable securities					Unrealized gain on valuation of bond investments
	Ref.	Debit	Ref.	Credit		Ref.	Debit	Ref.	Credit
			4	11500				6	1000
C	Date	Account titles					DR	CR
	6	Adjustment to market					13500
		Unrealized gain on valuation of stock investments						12500
		Unrealized gain on valuation of bond investments						1000
		(Cost adjusted to market value)
	Preferred shares:
	Cost per preferred shares=$ 43
	Market value=$ 45.50
	Number of preferred shares held=9000-4000=5000 shares
	Increase in value=5000*(45.50-43)=5000*2.50=$ 12500
	Bonds:
	Cost=$ 74000
	Market value=$ 75000
	Increase in value=75000-74000=$ 1000