On December 31, 2010, Sauder Associates owned the following securities, held as long term investments.
|
Common Stock |
Shares |
Cost |
|
Adel Co. |
4,000 |
$100,000 |
|
Beran Co. |
5,000 |
30,000 |
|
Caren Co. |
3,000 |
60,000 |
On this date, the total fair value of the securities was equal to its cost. The securities are not held for influence or control over the investees. In 2011, the following transactions occurred.
|
July 1 |
Received $1 per share semiannual cash dividend on Beran Co. common stock. |
|
Aug. 1 |
Received $0.50 per share cash dividend on Adel Co. common stock. |
|
Sept. 1 |
Sold 1,500 shares of Beran Co. common stock for cash at $8 per share, less brokerage fees of $300. |
|
Oct. 1 |
Sold 600 shares of Adel Co. common stock for cash at $30 per share, less brokerage fees of $600. |
|
Nov. 1 |
Received $1 per share cash dividend on Caren Co. common stock. |
|
Dec. 15 |
Received $0.50 per share cash dividend on Adel Co. common stock. |
|
31 |
Received $1 per share semiannual cash dividend on Beran Co. common stock. |
At December 31, the fair values per share of the common stocks were: Adel Co. $23, Beran Co. $7, and Caren Co. $19.
Instructions
(a) Journalize the 2011 transactions and post to the account Stock Investments. (Use the T account form.)
(b) Prepare the adjusting entry at December 31, 2011, to show the securities at fair value. The stock should be classified as available for sale securities.
(c) Show the balance sheet presentation of the investment related accounts at December 31, 2011. At this date, Sauder Associates has common stock $2,000,000 and retained earnings $1,200,000.