On 2010 September 1, Ramsey Company purchased the
following relatively long-term investments classified as available-for-sale securities:
•Two thousand shares of Lacey Company capital stock at USD 439.20 plus broker”s commission of USD 5,760.
•One thousand shares of Membrow Company capital stock at USD 705.60 plus broker”s commission of USD 5,040. Cash dividends of USD 18.00 per share on the Lacey capital stock and USD 14.40 per share on the Membrow capital stock were received on December 7 and December 10, respectively. On 2010 December 31, per share market values are Lacey, USD 460.80; and Membrow, USD 655.20.
a. Prepare journal entries to record these transactions.
b. Prepare the necessary adjusting entry(ies) at 2010 December 31, to adjust the carrying values assuming that market price changes are believed to be temporary. Where would the accounts appear in the financial statements?