Question

On February 15, paid $180,000 cash to purchase American General's 90-day short-term notes at par, which are dated February 15 and pay 6% interest (classified as held-to-maturity).

On March 22, bought 550 shares of Fran Industries common stock at $22 cash per share plus a $110 brokerage fee (classified as long-term available-for-sale securities).

On May 15, received a check from American General in payment of the principal and 90 days' interest on the notes purchased in transaction a.

On July 30, paid $54,000 cash to purchase MP3 Electronics' 5% notes at par, dated July 30, 2017, and maturing on January 30, 2018 (classified as trading securities).

On September 1, received a $0.26 per share cash dividend on the Fran Industries common stock purchased in transaction b.

On October 8, sold 275 shares of Fran Industries common stock for $28 cash per share, less a $90 brokerage fee.

On October 30, received a check from MP3 Electronics for three months’ interest on the notes purchased in transaction d.

Prepare journal entries to record the above transactions involving both the short-term and long-term investments of Cancun Corp., all of which occurred during calendar-year 2017. Use the account Short-Term Investments for any transactions that you determine are short term. (Use 360 days in a year. Do not round your intermediate calculations.)

Answer 1

a)Shortterm investments-HTM(AG) (db) 180000
Cash(Cr)180000
b)Longterm investments-AFS(FRan) (db) (550*22)+110=12210
Cash(Cr)12210
c)cash(db) 182700
Shortterm investments-HTM(AG)(cr) 180000
interest revenue(cr) (180000*6%*(90/360)=2700
d)Shortterm investments-tradin(MP3) (db) 54000
cash(cr)54000
e)cash(db) 550*0.26=143
dividend revenue(cr) 143
f)cash(db) (275*28)-90=7610
longterm investments-AFS(Fran) (cr) 12210/2=6105
Gain on long term investmentr(cr) 1505
g)cash(db) 54000*5%*(3/12)=675
interest revenue(Cr)675