question archive Trading equity securities
Trading equity securities
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Trading equity securities.
Gordon Company has the following securities in its portfolio of trading equity securities on December 31, 2003:
Cost Fair Value
5,000 shares of Milner Corp., Common $160,000 $139,000
10,000 shares of Eddy, Common 182,000 190,000
$342,000 $329,000
All of the securities had been purchased in 2003. In 2004, Gordon completed the following securities transactions:
March 1 Sold 5,000 shares of Milner Corp., Common @ $31 less fees of $1,500.
April 1 Bought 600 shares of Yount Stores, Common @ $50 plus fees of $550.
The Gordon Company portfolio of trading equity securities appeared as follows on December 31, 2004:
Cost Fair Value
10,000 shares of Eddy, Common $182,000 $195,500
600 shares of Yount Stores, Common 30,550 25,500
$212,550 $221,000
Instructions
Prepare the general journal entries for Gordon Company for:
(a) the 2003 adjusting entry.
(b) the sale of the Milner Corp. stock.
(c) the purchase of the Yount Stores' stock.
(d) the 2004 adjusting entry.
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Unrealized gain (loss) on trading securities 13,000
Market adjustment on trading securities 13,000
To reflect the loss in value for securities in the trading
Account,
b. Sale of Milner
Realized gain (loss) on sale of securities 6,500
Trading securities 6,500
Market adjustment on trading securities 21,000
Unrealized gain (loss) on trading securities 21,000
To recognize the actual loss on sale including cost of sale;
To restore the unrealized gain previously taken into income.
c. Purchase of Yount Stores' stock
Trading securities 30,550
Cash 30,550
To record the purchase of 600 shares of Yount at $50 + fees
d. 2004 AJE
Market adjustment on trading securities 450
Unrealized gain on trading securities 450
To record the net change for adjustments to market value.
Note that Eddy had already been adjusted in the prior year;
The gain in value was an incremental amount of $5,500 less
Of the loss on Yount's market value.
