Slip Systems had no short-term investments prior to this year. It had the following transactions this year involving short-term stock investments with insignificant influence.
Feb. 6. Purchased 3,400 shares of Nokia stock at $41 per share.
Apr. 7. Purchased 1,200 shares of Dell stock at $39 per share.
June 2. Purchased 2,500 shares of Merck stock at $72 per share.
30. Received a $1.00 per share cash dividend on the Nokia shares.
Aug. 11 Sold 850 shares of Nokia stock at $46 per share.
24. Received a $0.10 per share cash dividend on the Dell shares.
Nov. 9 Received a $1.50 per share cash dividend on the remaining Nokia shares.
Dec. 18 Received a $0.15 per share cash dividend on the Dell shares.
Required
1. Prepare journal entries to record the preceding transactions and events.
2. Prepare a table to compare the year-end cost and fair values of the short-term stock investments. The year-end fair values per share are Nokia, $40; Dell, $41; and Merck, $59.
3. Prepare an adjusting entry, if necessary, to record the year-end fair value adjustment for the portfolio of short-term stock investments.
Analysis Component
4. Prepare the current asset section of the balance sheet for the fair value adjustment to Slip’s short-term investments.
5. Identify the dollar increase or decrease from Slip’s short-term stock investments on
(a) Its income statement this year and
(b) The equity section of its balance sheet at this year-end.
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