70.2K

Verified Solution

Link Copied!

Comprehensive In class problem Investments Nov 9^th

1. Prepare Journal entries to record the following transactions involving short-term debt investments.
2. On May 15, paid $100 cash to purchase Munis 120 day short term debt securities ($100 stated value), that pay 6% interest. (categorized as held-to-maturity securities).
3. On September 13, received a check from Muni in payment of the principal and 120 days interest on the debt securities purchased in transaction above.

2. Gard Co. completes the following transactions to its short-term debt investments:

May 8: Purchased FedEx notes as short term investment in available for sale securities $12,975

Sep 2: Sold part of its investment in FedEx notes for $4,475 which had cost $4,325

Oct 2: Purchased Ajay bonds for $25,600 as a short term investment available for sale

Dec 31: Fair values of the debt securities available-for-sale by Gard are: $9,600 for FedEx and $22,000 for Ajay.

3. Prepare journal entries to record the following transactions for Garcia Company 2019:

Jan 1: Purchased 400 shares of Lopez Co common stock for $3,000 cash. Lopez has 1,000 shares of common stock outstanding.

Aug 1: Lopez declared and paid a cash dividend of $2 per share

Dec 31: Lopez reported net income for the year of $2,500

2020

Aug 1: Lopez declared and paid a cash dividend of $2,25 per share

Dec 31: Lopez reported net income for the year of $2,750

2021

Jan 1: Garcia sold all 100 shares of Lopez for $1,300 cash

Answer & Explanation Solved by verified expert

See Answer