Question

American Surety and Fidelity buys and sells securities expecting to earn profits on short-term differences in price. For the first 11 months of 2021, gains from selling trading securities totaled $4 million, losses from selling trading securities were $11 million, and the company had earned $5 million in interest revenue. The following selected transactions relate to American's investments in trading securities and equity securities during December 2021, and the first week of 2022. The company's fiscal year ends on December 31. No trading securities or equity investments were held by American on December 1, 2021. Assume that the bonds are purchased at face value.

2021
Dec.		12		Purchased FF&G Corporation bonds for $16 million.
		13		Purchased 2 million shares of Ferry Intercommunications common stock for $22 million. American does not have significant influence over Ferry's operations or policies.
		15		Sold the FF&G Corporation bonds for $16.8 million.
		22		Purchased U.S. Treasury bills for $82 million and Treasury bonds for $82 million.
		23		Sold half the shares of Ferry Intercommunications common stock for $10 million.
		26		Sold the U.S. Treasury bills for $87 million.
		27		Sold the Treasury bonds for $79 million.
		28		Received cash dividends of $200,000 from the Ferry Intercommunications common stock shares.
		31		Recorded any necessary adjusting entry relating to the remaining investment. The market price of the Ferry Intercommunications stock was $10 per share.

2022
Jan.		2		Sold the remaining Ferry Intercommunications common stock shares for $10.2 million.
		5		Purchased Warehouse Designs Corporation bonds for $51 million.

Required:
1. Prepare the appropriate journal entry for each transaction or event during 2021 including any year-end adjusting entries.
2. Indicate any amounts that American would report in its 2021 balance sheet and income statement as a result of these investments.
3. Prepare the appropriate journal entry for each transaction or event during 2022

Prepare the appropriate journal entry for each transaction or event during 2021 including any year-end adjusting entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5).)

Journal entry worksheet

• Record the purchase FF&G Corporation bonds for $16 million.

Note: Enter debits before credits.

	Date General Journal Debit Credit December 12, 2021

Indicate any amounts that American would report in its 2021 balance sheet and income statement as a result of these investments. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5

	($ in millions) Balance sheet: Current Assets Total $0.0 Income statement: Other revenue (expenses): Total interest and dividend revenue $0.0 Gain (loss) on investments: 0.0 Total other revenue (expenses)

Answer 1

Answer 1 & 3.
		(Amt. in millions)
Journal Entry
Date	Particulars	Dr. Amt.	Cr. Amt.
2021
12-Dec	Investment in FF& G Bonds	16.00
	Cash		16.00
	(To record the purchase of FF&G Bonds)
13-Dec	Investment in Ferry Common shares	22.00
	Cash		22.00
	(To record the purchase of Ferry Common Shares)
15-Dec	Cash	16.80
	Investment in FF & G Bonds		16.00
	Gain on Sale of Investments		0.80
	(To record the sale of FF&G Bonds)
22-Dec	Investment in US Treasury Bills	82.00
	Investment in US Treasury Bonds	82.00
	Cash		164.00
	(to record the purchase of US treasury Bills & Bonds)
23-Dec	Cash	10.00
	Loss on Sale of Investments	1.00
	Investment in Ferry Common Shares		11.00
	(To Record sale of the half of Shares of ferry)
26-Dec	Cash	87.00
	Investment in US Treasury Bills		82.00
	Gain on Sale of Investments		5.00
	(To record the sale of US Treasury Bills)
27-Dec	Cash	79.00
	Loss on Sale of Investments	3.00
	To Investment in US Treasury Bonds		82.00
	(To record the sale of US Treasury Bonds)
28-Dec	Cash	0.20
	Investment Revenue		0.20
	(To record the dividend recd from Ferry)
31-Dec	Net Unrealized Holding Gains & Losses	1.00
	Fair Value Adjustments		1.00
	(To record the fair value adjustment of AFS Investments)
2022
2-Jan	Cash	10.20
	Loss on Sale of Investments	0.80
	Investment in Ferry Common Shares		11.00
	(To record the sale of Ferry Common Shares)
5-Jan	Investment in Warehouse Bonds	51.00
	Cash		51.00
	(to record the purchase of warehouse bonds)

Answer 2.
Balance Sheet (Partial)
As on Dec 31, 2021
Current Assets:-
Short Term Investments
Investment in in Ferry Common Shares	11.00
Less: Fair Value Adjustments	(1.00)	10.00
Income Statement
For the Period Ended Dec 31, 2021
Investment Revenue	0.20
Gain on sale Of Investments	5.80
Loss on Sale of Investments	(4.00)
Net unrealized holding gains and losses on investments	(1.00)