In January 2019, the management of Northern Company concludes that it has sufficient cash to purchase some short-term investments in debt and stock securities. During the year, the following transactions occurred.
Feb. 1 Purchased 1,200 shares of LAF for $51,600.
Mar. 1 Purchased 500 shares of NCL for $18,500.
Apr. 1 Purchased 70 $1,000, 8% TRC bonds for $70,000. Interest is payable semiannually on April 1 and October 1.
July 1 Received a cash of $0.80 per share on the LAF common stock.
Aug. 1 Sold 200 shares of LAF at $42 per share.
Sept. 1 Received $2 per share cash on the NCL common stock.
Oct. 1 Received the semiannual interest on the TRC bonds.
Oct. 1 Sold the TRC bonds for $75,700.
At December 31, the fair values of the LAF and NCL common were $39 and $30 per share, respectively. These stock investments by Northern Company provide less than a 20% ownership interest.
Instructions
(a) Journalize the transactions and post to the accounts Debt Investments and Stock Investments. (Use the T-account form.)
(b) Prepare the adjusting entry at December 31, 2019, to report the investments at fair value.
(c) Show the presentation of investment securities at December 31, 2019.
(d) Identify the income statement accounts and give the statement classification of each account.
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