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26 October, 14:51

White company had no investments prior to the current year. It had the following transactions involving short-term available-for-sale and held-to-maturity securities during the year. Prepare journal entries to record the following transactions associated with the investment purchases. January 10 Purchased 6,000 shares of Gray Company stock at $15.00 plus a broker's fee of $700. (Classified as short-term available-for-sale securities) June 1 purchased $180,000 of Duke Company 4%, five-year bonds at par value. Interest payments are paid semiannually on June 1 and December 1. (Classified as held-to - maturity) July 1 Sold 3,000 shares of Gray company stock at $22 less a $600 brokerage fee. December 1 Received a check for the first semiannual interest payment on the Duke Company bonds. Answer (show calculations in description of JE when appropriate) Date Description DR CR Jan. 10 June 1 July 1 Dec. 1

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  1. 26 October, 15:23
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    Gray stocks 90,700 debit

    Cash 90,700 credit

    Duke - Bond 180,000 debit

    Cash 180,000 credit

    Cash 65,400 debit

    Gray stocks 45,350 credit

    Gain on Securities 20,050 credit

    Dec 1st

    Cash 3,600 debit

    Interest revenue 3,600 credit

    Explanation:

    Jan 10th

    6,000 x $15 + 700 fee = $90,700

    June 1st we record at cost as it was purchase at par.

    July 1st

    3,000 x $22 - 600 fee = $65,400

    Cost: 90,700 x 3,000/6,000 = 45,350

    Gain 65,400 - 45,350 = 20.050‬

    December 1st

    180,000 x 0.02 = $3,600

    the rate is 4% payment semiannually so we divide the rate by 2.
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