Question

At the end of 2015, Terry Company prepared the following schedule of investments in available-for-sale securities (common stock):

Company	Cost	12/31/15 Fair Value	Cumulative Change in Fair Value
Morgan Company	$37,000	$34,200	$(2,800)
Nance Company	42,000	43,100	1,100
Totals	$79,000	$77,300	$(1,700)

During 2016, the following transactions occurred:

June 8	Purchased Oscar Company common stock for $50,000.
Oct. 11	Sold all of the Morgan Company securities for $35,400.
Dec. 31	Received dividends of $900 on the Nance Company and Oscar Company securities, and the following year-end total market values were available: Nance Company common stock, $43,900; Oscar Company common stock, $49,600.

Required:

1.	Prepare journal entries to record the preceding information.
2.	Show how the preceding items are reported on Terry’s December 31, 2016, balance sheet. Assume all investments are noncurrent.

Answer 1

1) Journal entries
Date	Particulars	Debit	Credit
8-Jun	Investment in Available for Sale securities A/c	$50,000
	Cash A/c		$50,000
	( Being Purchase of common stock of oscar company)
11-Oct	Cash A/c	$35,400
	Loss on sale of Available for Sale securitie A/c	$1,600
	Loss on sale of Available for Sale securitie A/c		$37,000
	( Being securities of morgan company sold)
31-Dec	Cash A/c	$900
	Dividend received A/c		$900
	(Being Dividend received )
2)
		Cost	Fair value Dec 31,2016	Change in Fair Value
	Nance company	42000	43900	1900
	Oscar company	50000	49600	-400
	Total	92000	93500	1500