Rios Co. is a regional insurance company that began operations on January 1, 20Y2. The following selected transactions relate to investments acquired by Rios Co., which has a fiscal year ending on December 31:
20Y2
Feb. 1
Purchased 4,900 shares of Caldwell Inc. common stock at $35 per share plus a brokerage commission of $490. Caldwell has 100,000 shares of common stock outstanding.
May 1
Purchased securities of Holland Inc. as a trading investment for $84,798.
July 1
Sold 2,550 shares of Caldwell Inc. for $33 per share less a $95 brokerage commission.
July 31
Received an annual dividend of $0.30 per share on 2,350 shares of Caldwell Inc. stock.
Nov. 15
Sold the remaining shares of Caldwell Inc. for $36 per share less a $75 brokerage commission.
Dec. 31
The trading securities of Holland Inc. have a fair value on December 31 of $77,865.
20Y3
Apr. 1
Purchased securities of Fuller Inc. as a trading investment for $125,040.
Oct. 14
Sold securities of Fuller Inc. that cost $25,008 for $26,850.
Dec. 31
The fair values of the Holland Inc. and Fuller Inc. securities are as follows:
Issuing Company Cost Fair Value
Holland Inc. $84,798 $184,830
Fuller Inc. 100,032 79,620
Required:
1. Journalize the entries to record the preceding transactions, including any December 31 adjusting entries. Refer to the chart of accounts for the exact wording of the account titles. Round your intermediate calculations to two decimal places and round your final answers to the nearest dollar.
2. Prepare the Trading Investments section of the December 31, 20Y3, balance sheet for Rios Co.
3. How are unrealized gains or losses on trading investments presented on the financial statements of Rios Co.?
Chart of Accounts
Rios Co.
General Ledger
ASSETS
110 Cash
111 Petty Cash
120 Accounts Receivable
121 Allowance for Doubtful Accounts
131 Notes Receivable
132 Interest Receivable
141 Merchandise Inventory
145 Office Supplies
146 Store Supplies
151 Prepaid Insurance
161 Investments-Caldwell Inc. Stock
162 Trading Investments-Holland Inc.
163 Trading Investments-Fuller Inc.
165 Valuation Allowance for Trading Investments
166 Valuation Allowance for Available-for-Sale Investments
181 Land
191 Store Equipment
192 Accumulated Depreciation-Store Equipment
193 Office Equipment
194 Accumulated Depreciation-Office Equipment
LIABILITIES
210 Accounts Payable
221 Notes Payable
231 Interest Payable
241 Salaries Payable
251 Sales Tax Payable
EQUITY
311 Common Stock
312 Paid-In Capital in Excess of Par-Common Stock
321 Preferred Stock
322 Paid-In Capital in Excess of Par-Preferred Stock
331 Treasury Stock
332 Paid-In Capital from Sale of Treasury Stock
340 Retained Earnings
350 Unrealized Gain (Loss) on Available-for-Sale Investments
351 Cash Dividends
352 Stock Dividends
REVENUE
410 Sales
611 Interest Revenue
612 Dividend Revenue
631 Gain on Sale of Investments
641 Unrealized Gain on Trading Investments
EXPENSES
511 Cost of Merchandise Sold
512 Bad Debt Expense
515 Credit Card Expense
516 Cash Short and Over
520 Salaries Expense
531 Advertising Expense
532 Delivery Expense
533 Repairs Expense
534 Selling Expenses
535 Rent Expense
536 Insurance Expense
537 Office Supplies Expense
538 Store Supplies Expense
561 Depreciation Expense-Store Equipment
562 Depreciation Expense-Office Equipment
590 Miscellaneous Expense
710 Interest Expense
731 Loss on Sale of Investments
741 Unrealized Loss on Trading Investments
Labels
Current assets
Current liabilities
December 31, 20Y3
Amount Descriptions
Net income
Net loss
Other income (loss)
Other comprehensive income (loss)
Trading investments (at cost)
Trading investments (at fair value)