Prepare journal entries to record the following transactions involving both the short term and long term investments of Sophia Corp., all of which occurred during calendar year 2011. Use the account Short Term
Investments for any transactions that you determine are short term.
a. On February 15, paid $150,000 cash to purchase American General’s 120 day short term notes at par, which are dated February 15 and pay 10% interest (classified as held to maturity).
b. On March 22, bought 700 shares of Frain Industries common stock at $25 cash per share plus a $250 brokerage fee (classified as long term available for sale securities).
c. On June 15, received a check from American General in payment of the principal and 120 days’ interest on the notes purchased in transaction a.
d. On July 30, paid $50,000 cash to purchase MP3 Electronics’ 8% notes at par, dated July 30, 2011, and maturing on January 30, 2012 (classified as trading securities).
e. On September 1, received a $0.50 per share cash dividend on the Frain Industries common stock purchased in transaction b.
f. On October 8, sold 350 shares of Frain Industries common stock for $32 cash per share, less a $175 brokerage fee.
g. On October 30, received a check from MP3 Electronics for three months’ interest on the notes purchased in transaction d.