Question

American Surety and Fidelity buys and sells securities expecting to earn profits on short-term differences in price. For the first 11 months of 2018, gains from selling trading securities totaled $4 million, losses were $11 million, and the company had earned $5 million in investment revenue. The following selected transactions relate to American's trading account and equity securities investment account during December 2018, and the first week of 2019. The company's fiscal year ends on December 31. No trading securities were held by American on December 1, 2018.

2018
Dec.		12		Purchased FF&G Corporation bonds for $16 million.
		13		Purchased 2 million Ferry Intercommunications common shares for $22 million.
		15		Sold the FF&G Corporation bonds for $16.8 million.
		22		Purchased U.S. Treasury bills for $82 million and Treasury bonds for $82 million.
		23		Sold half the Ferry Intercommunications common shares for $10 million.
		26		Sold the U.S. Treasury bills for $87 million.
		27		Sold the Treasury bonds for $79 million.
		28		Received cash dividends of $200,000 from the Ferry Intercommunications common shares.
		31		Recorded any necessary adjusting entry(s) and closing entries relating to the investments. The market price of the Ferry Intercommunications stock was $10 per share.

2019
Jan.		2		Sold the remaining Ferry Intercommunications common shares for $10.2 million.
		5		Purchased Warehouse Designs Corporation bonds for $51 million.

Required:
1. Prepare the appropriate journal entry for each transaction or event during 2018.
2. Indicate any amounts that American would report in its 2018 balance sheet and income statement as a result of these investments.
3. Prepare the appropriate journal entry for each transaction or event during 2019.

Requirement 1:

1. Record the Purchase FF&G Corporation bonds for $16 million.

2. Record the Purchase 2 million Ferry Intercommunications common shares for 22 million

3. Record the entry to adjust to fair value on the date of the sale of the FF&G bonds.

4. Record the entry for sale FF&G Corporation bonds for 16.8 Million.

5. Record the purchase US Treasury bills for $82 million and Treasury bonds for $82 million.

6. Record the entry to adjust to fair value on the date of the sale of the Ferry Intercommunications common shares.

7. Record the entry for sale Ferry Intercommunications common shares for $10 million.

8. Record the entry to adjust to fair value on the date of sale of the US Treasury bills.

9. Record the entry for sale US Treasury bills for $87 Million

10. Record the entry to adjust to fair value on the date of the sale of the US Treasury bond.

11. Record the entry for sale Treasury bonds for $79 million.

12. Record the entry for cash dividend received of $200,000 from the Ferry Intercommunications common shares.

13. Record the entry for fair-value adjustment.

No Date General Journal Debit Credit December 12, 201 Investment in FF&G Corporation bonds 16.0 Cash 16.0 22.0 December 13, 201 Investment in Ferry shares Cash 22.0 December 15, 201 Fair value adjustment Unrealized holding loss—OCI 16.8 December 15, 201 Cash Investment in FF&G Corporation bonds Gain on sale of investments 16.0 0.8 December 22, 201 Investment in U.S. treasury bills Investment in U.S. treasury bonds 82.0 82.0 Cash 164.0 December 23, 201 Unrealized holding loss—NI Fair value adjustment

Answer 1

No	Date	Description	Debit	Credit
1	12-Dec-2018	Investment in FF&G Corporation bonds	16
		Cash		16
2	13-Dec-2018	Investment in Ferry Shares	22
		Cash		22
3	15-Dec-2018	Fair Value Adjustment	0.8
		Unrealized Gain - OCI		0.8
4	15-Dec-2018	Cash	16.8
		Unrealized Gain - OCI	0.8
		Investment in FF&G Corporation bonds		16.8
		Gain on sale of Investment in FF&G Corporation bonds		0.8
5	22-Dec-2018	Investment in US Treasury Bills	82
		Investment in US Treasury Bonds	82
		Cash		164
6	23-Dec-2018	Unrealized Loss -NI	1
		Fair Value Adjustment		1
7	23-Dec-2018	Cash	11
		Loss on sale of Investment in Ferry Shares	1
		Investment in Ferry Shares		11
		Unrealized Gain - OCI		1
8	26-Dec-2018	Fair Value Adjustment	5
		Unrealized Gain - NI		5
9	26-Dec-2018	Cash	87
		Unrealized Gain - OCI	5
		Investment in US Treasury Bills		87
		Gain on sale of Investment of Treasury Bills		5
10	27-Dec-2018	Unrealized Loss - OCI	3
		Fair Value Adjustment		3
11	27-Dec-2018	Cash	83
		Loss on sale of Investments	3
		Investment in U.S Treasury Bonds		83
		Unrealized Loss - OCI		3
12	28-Dec-2018	Cash	2
		Investment Revenue		2
13	31-Dec-2018	Unrealized Holding Gain - NI
14	05-Jan-2019	Investment in Warehouse design Corporation Bonds	51
		Cash		51