ACCT 201 Principles of Financial Accounting

ACCT 201 Principles of Financial Accounting - Spring 2003
Sections 001 and 002 - Dr. Fred Barbee - Homework Assignment #7 - Chapter 7
Short-Term Investment Transactions

NOTE: Although this problem is different from that found in the text, you may use the working papers designed for Problem 7-6B in solving this problem.

Dryfus Company, which began operations in 2002, invests its idle cash in trading securities. The following transactions relate to the company's short-term investments in its trading securities.

2002 Transactions in Trading Securities
Mar. 10 Purchased 2,450 shares of Ford Motor Company, at $26 per share plus $1,653 commission.

May 7 Purchased 2,200 shares of Lucent at $44.25 per share, plus a $968 commission.

Sep. 1 Purchased 1,200 shares of Black and Decker at $47.50 per share plus a $675 commission.

**2002 Transactions in Trading Securities**
Mar.	10	Purchased 2,450 shares of Ford Motor Company, at $26 per share plus $1,653 commission.
May	7	Purchased 2,200 shares of Lucent at $44.25 per share, plus a $968 commission.
Sep.	1	Purchased 1,200 shares of Black and Decker at $47.50 per share plus a $675 commission.

2003 Transactions in Trading Securities
Apr. 26 Sold 2,200 shares of Lucent at $43.75 per share less a $1,050 commission.

27 Sold 1,200 shares of Black and Decker at $49.25 less a $735 commission.

June 2 Purchased 2,500 shares of Merck stock at $72.50 per share plus a $3,890 brokerage fee.

14 Purchased 900 shares of Wal-Mart at $50.25 per share plus a $1,082 commission.

**2003 Transactions in Trading Securities**
Apr.	26	Sold 2,200 shares of Lucent at $43.75 per share less a $1,050 commission.
	27	Sold 1,200 shares of Black and Decker at $49.25 less a $735 commission.
June	2	Purchased 2,500 shares of Merck stock at $72.50 per share plus a $3,890 brokerage fee.
	14	Purchased 900 shares of Wal-Mart at $50.25 per share plus a $1,082 commission.

**2004 Transactions in Trading Securities**
Jan.	28	Purchased 2,500 shares of Dell Co. stock at $39.50 per share plus a $2,356 commission.
	31	Sold 2,500 shares of Merck at $71.25 per share less a brokerage commission of $2,356.
Aug.	22	Sold 2,450 shares of Ford Motor Company, at $23.50 per share less $1,437 commission.
Sep.	3	Purchased 3,400 shares of Nokia stock at $41.25 per share plus a $3,000 brokerage fee.
Oct.	9	Sold 900 shares of Wal-Mart at $51.25 per share less a $1,025 commission.

Required:

Prepare journal entries to record these short-term investment activities for the years shown. (Ignore any year-end adjusting entries.)
On December 31, 2004, prepare the adjusting entry to record the market value of these investments: Nokia's share price was $42.75 and Dell's share price was $42. (The Market Adjustment - Trading account had an unadjusted balance of zero.)