On December 27, 2014, Dave Alexander Company purchased the following three equity securities fo


QUESTION :

On December 27, 2014, Dave Alexander Company purchased the following three equity securities for a trading portfolio:

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On December 31, 2014, the three securities were still held and the respective fair values were as follows:

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The three securities were all sold on January 2, 2015 for the following amounts:

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No more trading securities were held or acquired.

Instructions

(a) Prepare all journal entries related to these securities.

(b) Describe what will appear on the financial statements for 2014 with regard to these securities. Assume a calendar year reporting period.

(c) Describe what will appear on the financial statements for 2015 with regard to these securities.

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Expert Answer

(b) The securities will be reported at the fair value of $65,500 ($62,000 cost plus $3,500 excess of fair value over cost reflected in the fair value adjustment account)

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