On December 31, 2018, the end of its first year of operations, Botani Associates owned the following securities that are held as long-term investments.
Common Stock Shares Cost
C Co………………………….1,000…….$48,000
D Co………………………….5,000………36,000
E Co…………………………..1,200………24,000
On this date, the total fair value of the securities was equal to its cost. The securities are not held for influence or control over the investees. In 2019, the following transactions occurred.
July 1 Received $2.00 per share semiannual cash on D Co. common stock.
Aug. 1 Received $0.50 per share cash on C Co. common stock.
Sept. 1 Sold 1,000 shares of D Co. for cash at $9 per share.
Oct. 1 Sold 300 shares of C Co. for cash at $53 per share.
Nov. 1 Received $1 per share cash on E Co. common stock.
Dec. 15 Received $0.50 per share cash on C Co. common stock.
31 Received $2.20 per share semiannual cash on D Co. common stock.
At December 31, the fair values per share of the common were C Co. $47, D Co. $7, and E Co. $24. These investments should be classified as long-term.
Instructions
(a) Journalize the 2019 transactions and post to the account Stock Investments. (Use the T-account form.)
(b) Prepare the adjusting entry at December 31, 2019, to show the securities at fair value. Botani has less than a 20% ownership interest in all these common (C Co., D Co., and E Co.).
(c) Show the presentation of the investments at 2019. These investments should be classified as long-term. At this date, Botani Associates has $2,000,000 and retained earnings $1,200,000.
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