Question

Reporting of and Analyzing Financial Effects of Available-for-Sale (Equity) Securities

Guay Company had the following transactions and adjustment related to a stock investment classified as a trading security. Assume that when the shares were purchased, management did not intend to sell the stock in the near future. Record the transactions and adjustments for Guay Company under this assumption.

2015
Nov. 15	Purchased 6,000 shares of Core, Inc.'s common stock at $16 per share plus a brokerage commission of $900. Guay Company expects to sell the stock in the near future.
Dec. 22	Received a cash dividend of $1.25 per share of common stock from Core.
Dec. 31	Made the adjusting entry to reflect year-end fair value of the stock investment in Core. The year-end market price of the Core common stock is $17.5 per share.
2016
Jan. 20	Sold all 6,000 shares of the Core common stock for $94,400.

Required
a. Prepare journal entries to record these transactions.

General Journal
Date	Description	Debit	Credit
2015
11/15	Answer

Answer	Answer
	Answer

Answer	Answer
12/22	Answer

Answer	Answer
	Answer

Answer	Answer
12/31	Answer

Answer	Answer
	Answer

Answer	Answer
2016
1/20	Answer

Answer	Answer
	Unrealized Gain	Answer	Answer
	Answer

Answer	Answer
	Gain on Sale of Investment	Answer	Answer

b. Post the journal entries from a to their respective T-accounts.

Cash (A)
11/15/15	Answer	Answer
12/22/15	Answer	Answer
12/31/15	Answer	Answer
1/20/16	Answer	Answer

Investment in Core, Inc. (A)
11/15/15	Answer	Answer
12/22/15	Answer	Answer
12/31/15	Answer	Answer
1/20/16	Answer	Answer

Gain on sale of investment (R)
11/15/15	Answer	Answer
12/22/15	Answer	Answer
12/31/15	Answer	Answer
1/20/16	Answer	Answer

Unrealized gain (AOCI)
11/15/15	Answer	Answer
12/22/15	Answer	Answer
12/31/15	Answer	Answer
1/20/16	Answer	Answer

Dividend Income (R)
11/15/15	Answer	Answer
12/22/15	Answer	Answer
12/31/15	Answer	Answer
1/20/16	Answer	Answer

c. Record each of the transactions in the financial statement effects template.

Balance Sheet Transaction Cash Asset + Noncash Assets = Liabilities + Contrib. Capital + Earned Capital 11/15/15 Purchase 6,000 shares of Core, Inc. common $Answer + $Answer = $Answer + $Answer + $Answer 12/22 Dividend income Answer + Answer = Answer + Answer + Answer 12/31 Increase in investment Answer + Answer = Answer + Answer + Answer 1/20/16 Sale of Core, Inc. common Answer + Answer = Answer + Answer + Answer Answer + Answer = Answer + Answer + Answer

Income Statement Revenues - Expenses = Net Income $Answer - $Answer = $Answer Answer - Answer = Answer Answer - Answer = Answer Answer - Answer = Answer

Answer 1