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Entries for purchase, sale and valuation of securities

Trading equity securities.

Gordon Company has the following securities in its portfolio of trading equity securities on December 31, 2003:

Cost Fair Value

5,000 shares of Milner Corp., Common $160,000 $139,000

10,000 shares of Eddy, Common 182,000 190,000

$342,000 $329,000

All of the securities had been purchased in 2003. In 2004, Gordon completed the following securities transactions:

March 1 Sold 5,000 shares of Milner Corp., Common @ $31 less fees of $1,500.

April 1 Bought 600 shares of Yount Stores, Common @ $50 plus fees of $550.

The Gordon Company portfolio of trading equity securities appeared as follows on December 31, 2004:

Cost Fair Value

10,000 shares of Eddy, Common $182,000 $195,500

600 shares of Yount Stores, Common 30,550 25,500

$212,550 $221,000

Instructions

Prepare the general journal entries for Gordon Company for:

(a) the 2003 adjusting entry.

(b) the sale of the Milner Corp. stock.

(c) the purchase of the Yount Stores' stock.

(d) the 2004 adjusting entry.

Solution Preview

a. 2003 AJE

Unrealized gain (loss) on trading securities 13,000
Market adjustment on trading securities 13,000
To reflect the loss in value for securities in the trading
Account,

b. Sale of Milner

Realized gain (loss) on sale of ...

Solution Summary

Adjusting entries with explanations are presented for trading in equity securities including purchase, sale and market adjustment for unrealized gain (loss)

$2.19