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 $21 million. 13 Purchased 2 million Ferry Intercommunications common shares for $26 million. 15 Sold the FF&G Corporation bonds for $21.9 million. 22 Purchased U.S. Treasury bills for $66 million and Treasury bonds for $74 million. 23 Sold half the Ferry Intercommunications common shares for $11 million. 26 Sold the U.S. Treasury bills for $69 million. 27 Sold the Treasury bonds for $72 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 $11 per share. 2019 Jan. 2 Sold the remaining Ferry Intercommunications common shares for $11.4 million. 5 Purchased Warehouse Designs Corporation bonds for $43 million. Prepare the appropriate journal entry for each transaction or event during 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5).)

Part 2

	($ in millions) Balance sheet (short-term investment): Total $0.0 Income statement:

Part 3

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

Note: Enter debits before credits.

	Date General Journal Debit Credit January 02, 2019

2. Record the sale of the remaining Ferry Intercommunications common shares for $11.4 million.

Note: Enter debits before credits.

	Date General Journal Debit Credit January 02, 2019

3. Record the purchase of the Warehouse Designs Corporation bonds for $43 million.

Note: Enter debits before credits.

	Date General Journal Debit Credit January 05, 2019

Answer 1

American Surety and Fidelity (in million $) Journal Enteries Date Particulars 12.12.2018 Investment in Bonds (FF&G Corporation) a/c Dr Debit in $ Credit in $ 21 To Cash 21 (Purchased Bonds 13.12.2018 Investment in Common Shares (Ferry) a/c Dr 2б To Cash 26 (Purchased shares 15.12.2018 Cash a/c Dr. 21.9 To Investment in Bonds (FF&G Corporation To Gain on sale of Investments 21 0.9 (Sale of Bonds 22.12.2018 Investment In Treasury Bills U.S.a/cDr Investment In Treasury Bonds U.S. a/c Dr 74 To Cash 140 (Investments in cash 23.12.2018 Cash a/c Dr. Loss on sale of Investmentsa/c Dr 2 To Investment in Common Shares (Fer 13 (Sale of shares) 22 x 0.5 11 26.12.2018 Cash a/c Dr. 69 To Investment In Treasury Bills U.S To Gain on sale of Investments Treasury Bills sold 27.12.2018 Cash a/c Dr. 72 Loss on sale of Investment a/c 2 To Investment In Treasury Bonds U.S 74 (Sale of Treasury bonds) 28.12.2018 Cash a/c Dr. 0.2 To Investment Revenue 0.2 (Revenue received in cash)

Adjusting Ent Date Particulars Debit in $ Credit in $ 31.12.2018 Unrealized holding loss on Investments a/c Dr To Investment in Common Shares (Fer 2 2 (11m - (26 0.5)) 1 Closing Ent Date Particulars 31.12.2018 Income Summary a/c Debit in $ Credit in $ Dr Investment Revenue (50.2) a/c Dr Gain on sale of Investments (40.93) a/c Dr 3.9 5.2 7.9 To Loss on sale of Investments (1122 To Unrealized holding loss on invetsments 15 2 Accounts closed Journal Enteries Date Particulars 2.1.2019 Cash a/c Debit in $ Credit in $ Dr. 11.4 Loss on sale of Investmentsa/c Dr 1.6 To Investment in Common Shares (Fer 13 (Sale of investments 5.1.2019 Investment In Bonds Warehouse Design a/c Dr 43 To Cash Investment in Bonds 43 Balance sheet As at 31.12.2018 Investment in Common Shares (Ferry) 13 Income Statement For the period ending 31.12.2018 Investment Revenue Gain on sale of Investments Loss on sale of Investment Unrealized holding loss on invetsments 5.2 7.9 15 2