Question

Mumford Corporation invested $30,000 in marketable securities on December 4. On December 9, it sold some of these investments for $10,000, and on December 18, it sold more of these investments for $5,000. The securities sold on December 9 had cost the company $7,000, whereas the securities sold on December 18 had cost the company $6,000. a. Record the purchase of marketable securities on December 4. b. Record the sale of marketable securities on December 9. c. Record the sale of marketable securities on December 18. d. Record the necessary fair value adjustment on December 31, assuming that the market value of the company's remaining unsold securities was $20,000.

Record the Purchase of marketable Securities.

Answer 1

Answer

	Date	Particulars	Debit	Credit
a)	4-Dec	Investment in Securities account Dr	$        30,000
		To Bank account		$        30,000
		(Purchase of marketable securities for $30,000)
b)	9-Dec	Bank account                                                                     Dr	$        10,000
		To Investment in Securities account		$          7,000
		To Profit on sale of investment (10,000-7000)		$          3,000
		(Sale of investment costing of $ 7,000 for $10,000)
c)	18-Dec	Bank account                                                                     Dr	$          5,000
		Loss on sale of investment (6,000-5000)	$          1,000
		To Investment in Securities account		$          6,000
		(Sale of investment of $6000 for $5,000)
d)	31-Dec	Investment in Securities account Dr	$          3,000
		To Unrealized gain on marketable securities		$          3,000
		(Recorded unrealized gain as on closing date)