Question

2. Prepare journal entries to record the following transactions involving both the short-term and long-term investments of HDX Inc., all of which occurred during calendar year 2019. a. On February 15, paid $100,000 cash to purchase Apex's 90-day short-term notes at par, which are dated February 15 and pay 5% interest (classified as short-term held-to- maturity). O B. On March 22, bought 1,000 shares of Fox Industries common stock (2% of Fox's outstanding stock) at $25 cash per share plus a $250 brokerage fee (classified as long- term available-for-sale). On May 15, received a check from Apex in payment of the principal and 90 days' interest on the notes purchased in transaction a. The note stated that the bankers rule would be applied in calculating interest. On July 30, paid $80,000 cash to purchase 40% of Maxwell Electronics' outstanding shares of common stock. On September 1, received a $1.50 per share cash dividend on the Fox Industries common stock purchased in transaction b. On October 8, sold 500 shares of Fox Industries common stock for $30 cash per share g. On December 31, Maxwell Electronics' (from d above) reported $100,000 of net income h. On December 31, HDX received a $1,000 payment from Maxwell for dividends. i. At December 31, the market value of Fox common stock is $28 per share.

Answer 1

In the books of HDX Inc, :

Transaction	Date	Account Titles	Debit	Credit
			$	$
a.	Feb 15	Short Term Held to Maturity Investments	100,000
		Cash		100,000
b.	Mar 22	Long Term AFS Investments	25,250
		Cash		25,250
c.	May 15	Cash	1,01,250
		Interest Revenue		1,250
		Short Term Held to Maturity Investments		100,000
d.	July 30	Equity Investments	80,000
		Cash		80,000
e.	Sep 1	Cash	1,500
		Dividend Revenue		1,500
f.	Oct 8	Cash	15,000
		Long Term AFS Investments		12,625
		Gain on Sale of Investments		2,375
g.	Dec 31	Equity Investments	40,000
		Investment Revenue		40,000
h.	Dec 31	Cash	1,000
		Equity Investments		1,000
i.	Dec 31	Fair Value Adjustments for AFS Investments	1,500
		Unrealized holding gain on AFS investments		1,500