The information below relates to Lennon Company's trading securities in 2007 and 2008.
(a) Prepare the journal entries for the following transactions. (45 points)
May 1, 2007 Purchased $250,000 par value of Coe Company bonds at 97 plus accrued interest. The bonds pay interest annually at 9% each December 31. Broker's commission was $2,500.
September 1, 2007 Sold $125,000 par value of Coe Company bonds at 94 plus accrued interest. Broker's commission, taxes, and fees were $1,250.
September 5, 2007 Purchased 5,000 shares of Doran, Inc. common stock for $25 per share. The broker's commission on the purchase amounted to $2,000.
December 31, 2007 Make the appropriate entry for the Coe Company bonds.
December 31, 2007 The market prices of the trading securities at December 31 were: Doran, Inc. common stock, $26 per share; and Coe Company bonds, 99. Make the appropriate entry.
July 1, 2008 Lennon sold 1/2 of the Doran, Inc. common stock at $27 per share. Broker's commissions, taxes, and fees were $1,000.
December 1, 2008 Lennon purchased 600 shares of Esparza, Inc. common stock at $40 per share. Broker's commission was $500.
December 31, 2008 Make the appropriate entry for the Coe Company bonds.
December 31, 2008 The market prices of the trading securities at December 31 were: Doran, Inc. common stock, $28 per share; Coe Company bonds, 98; and Esparza, Inc. common stock, $42 per share. Make the appropriate entry.
(b) Present the financial statement disclosure (balance sheet and income statement) of Lennon Company's transactions in trading securities for each of the years 2007 and 2008. Appropriate financial statement subheadings must be disclosed.
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