Question

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1. Campus Corporation had the following investment transactions: Jan. 1 Feb. 15 Mar. 31 June 1 Purchased Apex bonds for $10,000 plus a $500 brokerage fee. This purchase is considered a short-term investment in available-for-sale (AFS) debt securities by Campus Corporation. Purchased 1,000 shares of Eden, Inc. for $35,000 cash. This purchase is considered a long- term stock investment with insignificant influence by Campus Corporation. Received cash dividend of $0.30 per share from Eden, Inc. Purchased 5,000 shares of Lonestar, Inc. for $35 per share plus $5,000 in fees and commissions. These shares represent a 40% ownership in Lonestar, Inc. Received Lonestar, Inc. cash dividend of $4 per share. At Dec. 31, the Apex bonds had a fair (market) value of $12,500. At Dec. 31, the Eden, Inc. stock had a fair (market) value of $25 per share. Lonestar, Inc. reported net income of $150,000 for the year. Sept. 30 Dec. 31 Dec. 31 Dec. 31 Prepare the journal entries Campus Corporation should record for these transactions and events.

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Answer 1

А C D om 10,500 Dr 10,500 Cr Jan-01 Investment in Apex Bonds Bank (Being investments recognised along with the brokerage fee cost) 00 VO U Feb-15 Investment in Eden Inc. Shares Cash (Being investments reocgnised) 35,000 Dr 35,000 Cr 300 Dr Mar-31 Cash Income from Shares (Being dividend income recognised) 300 Cr Aw 180,000 Dr 180,000 Cr Jun-01 Investment in Lonestar shares Bank (Being investments recognised along with the brokerage fee cost) 9 20,000 Dr 20,000 Cr Sep-30 Cash Income from Shares (Being dividend income recognised from Lonestar) 23 2,000 Dr 2,000 Cr Dec-31 Investmet in Apex Bonds Fair Value Gain on Apex bonds (Being fair value gain recognised on bonds held for trading)

А Dec-31 No entry for Eden Inc as the shares are held for long term purpose Dec-31 No entry for Lonestar Inc for net profit earned during the year 2. Jan-15 Bank Investment in Lonestar shares Gain on Sale (Being sale recognised with gain) 125,000 Dr 90,000 Cr 35,000 Cr