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Trading securities

Gordon company has the following securities in its portfolio of trading equity securities on December 31, 2003:
5000 shares of Milner corp .,common $160000 $139000
10000 shares of Eddy, common $182000 $190000
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$342000 $329000

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

March 1 Sold 5000 shares of Milner common @ $ 31 less fees of $1500
April 1 Bought 600 shares of Yount stores, common @ $50 plus fees of $ 500
the Gordon company portfolio of trading equity securities appeared as follow on December 31, 2004:
10000 shares of Eddy, common 182000 195500
600 shares of Yount stores, common 30550 25500
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212550 221000

Prepare the general entries for Gordon company for:
A) the 2003 adjusting entry
B) the sales of Milner corp. stock.
C) the purchase of the Yount stores stock
D) the 2004 adjusting entry

Solution Preview

A) Since the securities are classified as trading securities, they would be recorded at market value and any difference between the cost and market value would be charged to income statement. The cost is 342,000 and the fair value is 329,000. The difference is 13,000. This would be recorded as an unrealized loss. The entry is
Urealized Holding Gain or Loss Income ......Dr 13,000
Securities Fair Value Adjustment (Trading) ...........Cr 13,000

Solution Summary

The solution explains the journal entries relating to trading securities