Question

(#8) Trading Securities

On July 1, 2018, Wolfpack Corporation purchased securities which it intends to buy and sell frequently. These securities consisted of (a) Todd Corporation 10%, 5-year bonds with a face value of $20,000 which were purchased for $18,500 and (b) 400 shares of Cornett Company common stock which were purchased at $40 per share. Assume that on December 31, 2018, Wolfpack received interest on the Todd Corporation bonds as well as a $2 dividend per share interest on the Cornett Company stock.

Required:

Prepare the December 31 journal entries to record the receipt of the interest and the receipt of the dividends.

CHART OF ACCOUNTS
Wolfpack Corporation
General Ledger
ASSETS 111 Cash 113 Investment in Trading Securities 121 Accounts Receivable 141 Inventory 152 Prepaid Insurance 181 Equipment 189 Accumulated Depreciation 191 Investment in Held-to-Maturity Debt Securities LIABILITIES 211 Accounts Payable 231 Salaries Payable 250 Unearned Revenue 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings	REVENUE 411 Sales Revenue 431 Interest Income 432 Dividend Income EXPENSES 500 Cost of Goods Sold 511 Insurance Expense 512 Utilities Expense 521 Salaries Expense 532 Bad Debt Expense 540 Interest Expense 541 Depreciation Expense 559 Miscellaneous Expenses 910 Income Tax Expense

Prepare the December 31 journal entries to record the receipt of the interest and the receipt of the dividends. Additional Instruction

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5

Answer 1

	Date	Account Title	Post Ref	Debit	Credit
1	31/12/18	Bank /Cash a/c		$ 800
2		Dividend Revenue Received a/c			$ 800
3
4	31/12/18	Cash/ Bank a/c		$ 2000
5		Interest Income a/c			$ 2000