Question

Rios Financial Co. is a regional insurance company that began operations on January 1, Year 1. The following transactions relate to trading securities acquired by Rios Financial Co., which has a fiscal year ending on December 31:

Record these transactions on page 10:

Year 1
Feb.	1.	Purchased 7,500 shares of Caldwell Inc. as a trading security at $50 per share plus a brokerage commission of $75.
May	1.	Purchased 3,000 shares of Holland Inc. as a trading security at $42 plus a brokerage commission of $90.
July	1.	Sold 4,500 shares of Caldwell Inc. for $46 per share less a $110 brokerage commission.
	31.	Received an annual dividend of $0.50 per share on Caldwell Inc. stock.
Dec.	31	The portfolio of trading securities was adjusted to fair values of $47 and $40 per share for Caldwell Inc. and Holland Inc., respectively.

Record these transactions on page 11:

Year 2
Apr.	1.	Purchased 5,000 shares of Fuller Inc. as a trading security at $25 per share plus a $100 brokerage commission.
July	31.	Received an annual dividend of $0.52 per share on Caldwell Inc. stock.
Oct.	14.	Sold 1,000 shares of Fuller Inc. for $28 per share less a $110 brokerage commission.
Dec.	31	The portfolio of trading securities had a cost of $376,200 and a fair value of $420,000, requiring a debit balance in Valuation Allowance for Trading Investments of $43,800 ($420,000 - $376,200). Thus, the credit balance from December 31, Year 1, is to be adjusted to the new balance.

	Required:
1.	Journalize the entries to record these transactions.
2.	Prepare the investment-related current asset balance sheet presentation for Rios Financial Co. on December 31, Year 2.
3.	How are unrealized gains or losses on trading investments presented in the financial statements of Rios Financial Co.? * Refer to the information given and the Chart of Accounts and Amount Descriptions provided for the exact wording of the answer choices for text entries. “Less” or “Plus” will automatically appear if it is required. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Char of Accounts ASSETS REVENUE 110 Cash 111 Petty Cash 120 Accounts Recevable 21 Allowance for Doubbful Accounts 131 Nates Receivable 132 Interest Receivable 141 Merchandise Inventory 145 Office Supplies 46 Store Supples 410 Sales 611 Interest Revenue 612 Dividend Revenue 631 Gain on Sale of Investments 641 Unrealized Gain an Trading Investments EXPENSES 511 Cast af Merchandise Sold 512 Bad Debt Expense 515 Credit Card Expense 518 Cash Short and Over 520 Salaries Expens 531 Advertising Expense 532 Delivery Expenise 533 Repairs Expense 534 Selling Expeiss 535 Rent Experse 538 Insuranice Expense 537 Office Supplies Expense 538 Store Supplies Expense 561 Depreciation Expense Store Equipment 582 Depreciation Expense Office Equipement 590 Miscelaneaus Expense 710 Intere Expense 731 Lass on Sale of Investments 741 Unrealized Loss an Trading Investments 51 Prepaid Insurance 161 Investments Caldwell Inc. 163 Investments-Fuller Inc 165 Valuation Allowance for Trading Investments 168 Valuation Allowance for Available-for-Sale Investments 81 Land 191 Store Equipment 192 Accumulated Depreciation-Stare Equipment 93 Office Equipment 94 Accurmulated Depreciatian-Office Equipment LIABILITIES 210 Accounts Payable 221 Nates Payable 231 Interest Payable 241 Salaries Payable 251 SaesTax Payable

Answer 1

Answer 1.
Journal Entry
Date	Particulars	Dr. Amt.	Cr. Amt.
Year 1
1-Feb	Investment in Caldwell Inc	375,075.00		7,500 Shares X $50 + $75
	Cash		375,075.00
	(record the purchase of shares )
1-May	Investment in Holland Inc	126,090.00		3,000 Shares X $42 + $90
	Cash		126,090.00
	(record the purchase of shares )
1-Jul	Cash	206,890.00		4,500 shares X $46 - $110
	Loss on sale of Investments	18,155.00		$206,890 - $225,045
	Investment in Caldwell Inc		225,045.00	$375,075 X (4,500 / 7,500)
	(record the sale of 4,500 shares - Caldwell inc.)
31-Jul	Cash	1,500.00		3,000 Shares X $0.50
	Investment Revenue		1,500.00	3,000 Shares X $0.50
	(Record the dividend recd from Caldwell Inc.)
31-Dec	Unrealized Loss on Trading Investments	15,120.00
	Valuation Allowance for Trading Investments		15,120.00
	(Record the Fair value adjustment of Trading securities)
Year 2
1-Apr	Investment in Fuller Inc	125,100.00		5,000 Shares X $25 + $100
	Cash		125,100.00
	(record the purchase of shares )
31-Jul	Cash	1,560.00		3,000 Shares X $0.52
	Investment Revenue		1,560.00	3,000 Shares X $0.52
	(Record the dividend recd from Caldwell Inc.)
14-Oct	Cash	27,890.00		1,000 shares X $28- $110
	Investment in Caldwell Inc		25,020.00	$125,100 X (1,000 / 5,000)
	Gain on sale of Investments		2,870.00	$27,890 - $25,020
	(record the sale of 1,000 shares - Fuller inc.)
31-Dec	Valuation Allowance for Trading Investments	58,920.00
	Unrealized Gain on Trading Investments		58,920.00
	(Record the Fair value adjustment of Trading securities)

Year 1	No. of Shares	Cost	Fair Value	Difference
Caldwell Inc.	3,000.00	150,030.00	141,000.00	(9,030.00)
Holland Inc.	3,000.00	126,090.00	120,000.00	(6,090.00)
Total		276,120.00	261,000.00	(15,120.00)
Year 2		Cost	Fair Value	Difference
Total		376,200.00	420,000.00	43,800.00
Add: Balance - Year 1				15,120.00
Total- Unrealized Gain - Adjustment				58,920.00
Answer 2.
Rios Financial Co.
Dec 31, Year 2
Assets
Current Assets
Trading Investment (At Cost)	376,200.00
Add: Valuation allowance for Trading Investment	43,800.00	420,000.00
Answer 3.
Unrealized Gain or Losses are disclosed in 'Other Income (Losses' in the Income Statement.