Instructions - Journalize transactions for investments in stocks.
Q.1.) Hermes Inc. had the following transactions pertaining to investments in common stock.
Jan. 1 Purchased 2,000 shares of Lanier Corporation common stock (5%) for $140,000 cash plus $2,100 broker’s commission.
July 1 Received a cash dividend of $3 per share.
Dec 1 Sold 500 shares of Lanier Corporation common stock for $37,000 cash, less $800 broker’s commission.
Dec 31 Received a cash dividend of $3 per share.
Q.2) Instructions:
a. Prepare the adjusting entry at December 31, 2006, to report the securities at fair value.
b. Show the balance sheet and income statement presentation at December 31, 2006, after adjustment to fair value.
At December 31, 2006, the trading securities for Jeng. Inc. are as follows:
Security Cost Fair Value
A $17,500 $16,000
B $12,500 $14,000
C $23,000 $17,000
$53,000 $47,000