Journal Entries and Balance Sheet Presentation for Investments in Securities
On December 31, 2006, Durst Company’s balance sheet showed the following balances related to its securities accounts:
|
Trading securities |
$155,000 |
|
|
Less: Market adjustment—trading securities |
(7,250) |
$147,750 |
|
Available for sale securities |
$108,000 |
|
|
Add: Market adjustment—available for sale securities |
10,000 |
118,000 |
|
Interest receivable—NYC water bonds |
|
1,250 |
Durst’s securities portfolio on December 31,2006,was made up of the following securities:
|
Security |
Classification |
Cost |
Market |
|
1,000 shares Herzog Corp. stock |
Trading |
$75,000 |
$76,250 |
|
800 shares Taylor Inc. stock |
Trading |
55,000 |
52,825 |
|
10% New York City water bonds (interest payable |
|
|
|
|
semiannually on January 1 and July 1) |
Trading |
25,000 |
18,675 |
|
1,000 shares Martin Inc. stock |
Available for sale |
59,000 |
65,000 |
|
2,000 shares Outdoors Unlimited Inc. stock |
Available for sale |
49,000 |
53,000 |
During 2007, the following transactions took place:
Jan. 3 Received interest on the New York City water bonds.
Mar. 1 Purchased 300 additional shares of Herzog Corp. stock for $22,950, classified as a trading security.
Apr. 15 Sold 400 shares of the Taylor Inc. stock for $69 per share.
May 4 Sold 400 shares of the Martin Inc. stock for $62 per share.
July 1 Received interest on the New York City water bonds.
Oct. 30 Purchased 1,500 shares of Cook Co. stock for $83,250, classified as a trading security.
The market values of the stocks and bonds on December 31, 2007, are as follows:
|
Herzog Corp stock |
$7660 per share |
|
Taylor Inc. stock |
$6850 per share |
|
Cook Co stock |
$5525 per share |
|
New York City water bonds |
$20,555 |
|
Martin Inc. stock |
$6100 per share |
|
Outdoors Unlimited Inc. stock |
$2700 per share |
Instructions:
1. Make all necessary journal entries for 2007, including any year end accrual or adjusting entries.
2. Show how the marketable securities would be presented on the balance sheet at December 31, 2007. Assume that the available for sale securities are classified as current assets.