Q19PGA_3
Question
Classifying and accounting for debt and equity investments
Jetway Corporation generated excess cash and invested in securities as follows: 2018
Jul. 2 Purchased 4,200 shares of Pogo, Inc. common stock at \(12.00 per share. Jetway plans to sell the stock within three months, when the company will need the cash for normal operations. Jetway does not have significant influence over Pogo.
Aug. 21 Received a cash dividend of \)0.80 per share on the Pogo stock investment.
Sep. 16 Sold the Pogo stock for \(13.40 per share.
Oct. 1 Purchased a Violet bond for \)20,000 at face value. Jetway classifies the investment as trading and short-term.
Dec. 31 Received a \(100 interest payment from Violet.
31 Adjusted the Violet bond to its market value of \)22,000.
Requirements
Prepare T-accounts for the investment assets, and show how to report the investments on Jetway’s balance sheet at December 31, 2018.
Step-by-Step Solution
VerifiedThe balance sheet for the year 2018 will report a trading debt investment of $20,000 in the current assets.
The investment purchased by the investor for a period that does not exceed one year is known as a short-term investment. It is converted into cash within one year.
T-Accounts for the investment Assets
Equity Investment | |||||
Date | Particulars | Amt $ | Date | Particular | Amt $ |
2 July 2018 | Cash | $50,400 | 16 Sep 2018 | Cash | $50,400 |
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| $50,400 |
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| $50,400 |
Trading Debt investment | |||||
Date | Particulars | Amt $ | Date | Particular | Amt $ |
1 Oct 2018 | Cash | $20,000 |
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Particular | Amount $ |
Assets |
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Current assets |
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Trading debt investment | $20,000 |