Generally accepted accounting principles provide guidance for reporting various securities. Accounting for
investments in stock and bonds of other companies are covered by FASB Codification 320 Investments - Debt and Equity Securities and 323 Equity Method and Joint Ventures. Nagurski, Inc. is preparing its December 31, 2019 financial statements. The securities for Nagurski, Inc. include:
Ø Bukich Company - 3,260 shares of Bukich Company common stock were purchased at $4.92 per share on July 27th of 2019. The broker's commission was $92. The shares were sold on January 10th of 2020 for $4.75. The broker's commission was $91. Bukich Company declared its annual dividend of $.47 per share on November 18th. The dividend was paid on December 20th to stockholders of record on December 1st. The stock is listed on the American Stock Exchange. Its ticker symbol is BKH. The year-end price of the stock was $3.36. Bukich Company has 71,834 shares outstanding.
Ø Dooley, Inc. bonds - 630 Dooley, Inc. $600 bonds were purchased on December 29th of the 2019 at 102.152 to yield 5.3%. The price includes a broker's commission. The stated rate of interest on the bonds is 5.624%, paid annually on August 1st. The bonds mature on August 31, 2038. Management intends to hold these bonds for two or three months. The market value of these bonds at the end of the year was 101.326.
Ø Galimore Company - 4,100 shares of Galimore Company preferred stock, were purchased at $11.37 per share on February 2nd of 2019. The broker's commission was $71.50. Galimore Company reported net income of $508,000 in the current year. Galimore Company declared annual dividend of $1.07 per share on October 16th of the current year. The dividend was paid on December 15th to stockholders of record on November 28th. The stock is listed on the American Stock Exchange. Its ticker symbol is GLM. The year-end price of the stock was $9.83. Galimore Company has 6,960 shares outstanding.
Ø Halas Inc. - 2,400 Halas Inc. $300 bonds were purchased on July 15, 2014 at 94.2394 to yield 8.426%. The price includes a broker's commission. The stated rate of interest of the bonds is 8.1128% and it is paid annually on May 31st. The bonds mature on May 31, 2046. Management intends and will be able to keep these bonds until they are paid off by Halas Inc. on May 31, 2044. The market value of these bonds at the prior year-end was 101.844 and at the current year-end it was 102.001.
Ø Luckman Inc. - 420,000 shares of Luckman Inc. common stock were purchased at $5.42 per share on April 3rd of the 2018. The broker's commission was $4,150. In the current, the year-end price is $6.16 per share. During the past two years, the stock paid a quarterly dividend of $0.76 per share on the last day of each calendar quarter. Management purchased the Luckman Inc. stock to help secure a retail outlet for their products. Luckman Inc. has 1,150,000 common shares outstanding. The stock is listed on NASDAQ. Its ticker symbol is LKM.
Ø Wade Company bonds - 2,100 Wade Company $900 bonds were purchased on November 24th of 2018 at 99.0261 to yield 6.4%. The price includes a broker's commission. The stated rate of interest on the bonds is 5.01% and it is paid semi-annually on March 31st and September 30th. Management has no plans to sell the bonds. Should the need arise before the bonds mature, management has indicated that they would sell the bonds.
Using the data for Nagurski, Inc. above,
- identify the appropriate category for each security, and
- explain why the security belongs in that category.
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