(Learning Objective 1: Accounting for a trading investment) PepsiCo reports short term investments on its balance sheet. Suppose a division of PepsiCo completed the following short term investment transactions during 20X8:
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20X8 |
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Nov. 6 |
Purchased 1,000 shares of Starbucks stock for $35,000. PepsiCo plans to sell the stock at a profit in the near future. |
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27 |
Received a cash dividend of $0.85 per share on the Starbucks stock. |
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Dec. 31 |
Adjusted the investment in Starbucks stock. Current market value is $33,000. PepsiCo still plans to sell the stock in early 20X9. |
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20X9 |
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Jan. 11 |
Sold the Starbucks stock for $36,000. |
Required
1. Prepare T accounts for Cash; Short Term Investment; Dividend Revenue; Unrealized Loss on Investment or Unrealized Gain on Investment; and Gain on Sale of Investment. Show the effects of PepsiCo’s investment transactions. Start with a cash balance of $55,000; all the other accounts start at zero.