Question

Carlsville Company, which began operations in 2017, invests its idle cash in trading securities. The following transactions are from its short-term investments in trading securities.

2017

Jan.		20		Purchased 1,000 shares of Ford Motor Co. at $28 per share plus a $120 commission.
Feb.		9		Purchased 2,300 shares of Lucent at $31 per share plus a $200 commission.
Oct.		12		Purchased 800 shares of Z-Seven at $7.60 per share plus a $100 commission.
Dec.		31		Fair value of the short-term investments in trading securities is $111,400.

2018

Apr.		15		Sold 1,000 shares of Ford Motor Co. at $30 per share less a $295 commission.
July		5		Sold 800 shares of Z-Seven at $11.00 per share less a $95 commission.
July		22		Purchased 1,700 shares of Hunt Corp. at $35 per share plus a $225 commission.
Aug.		19		Purchased 1,900 shares of Donna Karan at $44.80 per share plus a $100 commission.
Dec.		31		Fair value of the short-term investments in trading securities is $213,185.

2019

Feb.		27		Purchased 4,000 shares of HCA at $35 per share plus a $440 commission.
Mar.		3		Sold 1,700 shares of Hunt at $30 per share less a $120 commission.
June		21		Sold 2,300 shares of Lucent at $28.75 per share less a $42 commission.
June		30		Purchased 1,200 shares of Black & Decker at $47.50 per share plus a $595 commission.
Nov.		1		Sold 1,900 shares of Donna Karan at $44.80 per share less a $119 commission.
Dec.		31		Fair value of the short-term investments in trading securities is $204,100.

Required:
Prepare journal entries to record these short-term investment activities for the years shown. On December 31 of each year, prepare the adjusting entry to record any necessary fair value adjustment for the portfolio of trading securities. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round your intermediate calculations.)

Answer 1

2017
Date	General Journal	Debit	Credit
Jan-20	Short-term investments-Trading (Ford Motor Co.)	28120
	Cash [(1000 x $28) + $120]		28120
Feb-09	Short-term investments-Trading (Lucent)	71500
	Cash [(2300 x $31) + $200]		71500
Oct-12	Short-term investments-Trading (Z-Seven)	6180
	Cash [(800 x $7.60) + $100]		6180
Dec-31	Fair value adjustment-Trading (ST)	5600
	Unrealized gain-Income		5600

Working:

Investment	Cost $	Fair Value $	Unrealized gain (loss) $
Ford Motor Co.	28120
Lucent	71500
Z-Seven	6180
Total $	105800	111400	5600

2018
Date	General Journal	Debit	Credit
Apr-15	Cash [(1000 x $30) - $295]	29705
	Gain on sale of short-term investments		1585
	Short-term investments-Trading (Ford Motor Co.)		28120
Jul-05	Cash [(800 x $11) - $95]	8705
	Gain on sale of short-term investments		2525
	Short-term investments-Trading (Z-Seven)		6180
Jul-22	Short-term investments-Trading (Hunt)	59725
	Cash [(1700 x $35) + $225]		59725
Aug-19	Short-term investments-Trading (D. Karan)	85220
	Cash [(1900 x $44.80) + $100]		85220
Dec-31	Unrealized loss-Income	8860
	Fair value adjustment-Trading (ST)		8860

Working:

Investment	Cost $	Fair Value $	Unrealized gain (loss) $
Lucent	71500
Hunt	59725
D. Karan	85220
Total $	216445	213185	-3260
Balance required in fair value adjustment (Cr.)			3260
Existing balance in fair value adjustment (Dr.)			5600
Adjustment (Cr.)			8860

2019
Date	General Journal	Debit	Credit
Feb-27	Short-term investments-Trading (HCA)	140440
	Cash [(4000 x $35) + $440]		140440
Mar-03	Cash [(1700 x $30) - $120]	50880
	Loss on sale of short-term investments	8845
	Short-term investments-Trading (Hunt)		59725
Jun-21	Cash [(2300 x $28.75) - $42]	66083
	Loss on sale of short-term investments	5417
	Short-term investments-Trading (Lucent)		71500
Jun-30	Short-term investments-Trading (Black & Decker)	57595
	Cash [(1200 x $47.50) + $595]		57595
Nov-01	Cash [(1900 x $44.80) - $119]	85001
	Loss on sale of short-term investments	219
	Short-term investments-Trading (D. Karan)		85220
Dec-31	Fair value adjustment-Trading (ST)	9325
	Unrealized gain-Income		9325

Working:

Investment	Cost $	Fair Value $	Unrealized gain (loss) $
HCA	140440
Black & Decker	57595
Total $	198035	204100	6065
Balance required in fair value adjustment (Dr.)			6065
Existing balance in fair value adjustment (Cr.)			3260
Adjustment (Dr.)			9325

Note: Kindly select "No journal entry required" wherever required for other than the entries given.