Challenge Problem – Investments

Challenge Problem – Investments - 15,000...

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David Hanson Challenge Problem – Investments Wild Corporation has excess cash and has decided to purchase stock in other companies for the purpose of long-term gains. Below you will find information concerning the purchases of stock during the course of the year. All purchases are considered to be Available for Sale Securities. In 2008 Wild purchases stock in IBM for $10,000, stock in Cisco for $20,000 and stock in Microsoft for $25,000. None of this stock is sold in 2008. All purchases give Wild Corporation less then 20% ownership and insignificant influence in each of the company’s stock purchased. At the end of the year (2008) each of the holdings has a fair market value as indicated below: IBM $12,000 CISCO $21,000 MICROSOFT $27,000 1. From the information above make the necessary year end journal entry. Current Assets: Investment in Available-for-Sale Securities $45,000 Market Adjustment-Available-for-Sale Securities
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Unformatted text preview: 15,000 $60,000 Stockholders' Equity: Unrealized Holding Gains On Available- for-Sale Securities 15,000 Income Statement: No effect 2. In 2009 Wild received a $5,000 cash dividend from Cisco. Record this entry. Date (2009) Account Titles and Explanations Debits Credits Aug. 5 Cash 5,000 Dividend income (Cisco) 5,000 3. On October 15, 2009 Wild Company sold all the shares of Mircosoft for $33,000. Make the necessary entry (entries) to record the sale. Date (2009) Account Titles and Explanations Debits Credits October 15 Cash 33,000 Realized Gain on sale of securities $33 - $27 6,000 Investment in Available-for-Sale Securities 27,000 David Hanson 4. At the end of 2009, IBM had a fair market value of $19,000 and Cisco had a fair market value of $22,000. Make the necessary year end journal entry for December 31, 2009....
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Challenge Problem – Investments - 15,000...

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