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Rose Company had no short-term investments prior to this year
Rose Company had no short-term investments prior to this year. It had the following transactions this year involving short-term stock investments with insignificant influence.
| Apr. | 16 | Purchased 4,000 shares of Gem Co. stock at $26.00 per share. | ||
| July | 7 | Purchased 2,000 shares of PepsiCo stock at $50.00 per share. | ||
| 20 | Purchased 1,000 shares of Xerox stock at $18.00 per share. | |||
| Aug. | 15 | Received a(n) $0.80 per share cash dividend on the Gem Co. stock. | ||
| 28 | Sold 2,000 shares of Gem Co. stock at $32.75 per share. | |||
| Oct. | 1 | Received a $1.80 per share cash dividend on the PepsiCo shares. | ||
| Dec. | 15 | Received a $0.95 per share cash dividend on the remaining Gem Co. shares. | ||
| 31 | Received a $1.20 per share cash dividend on the PepsiCo shares. |
3. Prepare an adjusting entry to record the year-end fair value adjustment for the portfolio of short-term stock investments.
Expert Solution
ANSWER
| Date | Accounts | debit | credit |
| Apr-16 | short term investments-AFS (gem) | 104,000 | |
| cash | 104,000 | ||
| 4000*26 | |||
| Jul-07 | short term investments-AFS (pepsi) | 100,000 | |
| cash | 100,000 | ||
| 2000*50 | |||
| Jul-20 | short term investments-AFS (xerox) | 18000 | |
| cash | 18000 | ||
| 1000*18 | |||
| Aug-15 | Cash | 4000 | |
| Dividend revenue | 4000 | ||
| 4000*1 | |||
| Aug-28 | cash | 65,500 | |
| 2000*32.75 | |||
| short term investments-AFS (Gem) | 52000 | ||
| 2000*26 | |||
| Gain on sale of short term investments | 15,000 | ||
| Oct-01 | Cash | 3,600 | |
| Dividend revenue | 3,600 | ||
| 1.8*2000 | |||
| Dec-15 | Cash | 1900 | |
| Dividend revenue | 1900 | ||
| 0.95*(4000-2000) | |||
| Dec-31 | Cash | 2400 | |
| Dividend revenue | 2400 | ||
| 1.20*2000 | |||
| Ques 3 | |||
| Dec-31 | Unrealised loss equity | 5000 | |
| Fair value adjustment-AFS | 5000 |
Working
| Cost | fair value | unrealised amount | gain or loss | |
| Gem co | 52,000 | 56,000 | ||
| Pepsi co | 100,000 | 94,000 | ||
| Xerox | 18,000 | 15,000 | ||
| Total | 170,000 | 165,000 | -5000 | Unrealised loss |
| Working | ||||
| (4000-2000)*26 | 52,000 | |||
| (4000-2000)*28 | 56,000 | |||
| 2000*47 | 94,000 | |||
| 1000*15 | 15,000 | |||
================
DEAR STUDENT,
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