Chapter 1 Problem 12-5
Requirement a
March 1 Trading securities (2,000,000 x 93%) 1,860,000
Interest income (2,000,000 x 12% x 1/12) 20,000
Cash 1,880,000
April 1 Trading securities (4,000,000 x 95%) 3,800,000
Interest income (4,000,000 x 12% x 1/12) 40,000
Cash 3,840,000
Aug. 1 Cash (2,000,000 x 12% x 6/12) 120,000
Interest income 120,000
Sept. 1 Cash (4,000,000 x 12% x 6/12) 240,000
Interest income 240,000
Oct. 1 Cash (1,010,000 + 10,000) 1,020,000
Interest income (1,000,000 x 12% x 1/12) 10,000
Trading securities 950,000
Gain on sale of trading securities 60,000
Sales price (1,000,000 x 105%) 1,050,000
Less: Brokerage 40,000
Net proceeds 1,010,000
Less: Cost of bonds sold (1,000/4,000 x 3,800,000) 950,000
Gain on sale 60,000
Dec. 1 Cash (1,940,000 + 80,000) 2,020,000
Trading securities 1,860,000
Interest income (2,000,000 x 12% x 4/12) 80,000
Gain on sale of trading securities 80,000
Sales price (2,000,000 x 100%) 2,000,000
Less: Brokerage 60,000
Net proceeds 1,940,000
Less: Cost of bonds sold 1,860,000
Gain on sale 80,000
31 Accrued interest receivable (3,000,000 x 12% x 4/12) 120,000
Interest income 120,000
31 Unrealized loss – TS (2,850,000 – 2,700,000) 150,000
Trading securities 150,000
Requirement b
Current assets:
Trading securities, at market value (3,000,000 x 90) 2,700,000
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