On January 1, Heiress Company had surplus cash and decided
Question and Solution
On January 1, Heiress Company had surplus cash and decided to make some long-term investments. The following transactions occurred during the year: Jan. 1 Purchased thirty $1,000, 11% bonds of McComb Corporation at face value. Semiannual interest payment dates are January 1 and July 1 each year. The bonds are classified as available-for-sale. Feb. 15 Purchased 3,000 shares of Gordon Corporation stock at $28 per share, plus brokerage fees of $1,100. The stock is classified as available-for-sale. July 1 Received a semiannual interest payment on the McComb bonds. Sept. 30 Received an annual cash dividend of $1.00 per share on Gordon stock. Oct. 15 Sold 1,000 shares of the Gordon stock at $33 per share. Dec. 31 Adjusted the accounts to accrue interest on the McComb bonds. Required: 1. Prepare journal entries for these transactions. 2. The market quote for McComb’s bonds at closing on December 31 was 103. The Gordon stock closed at $32 per share. Prepare a partial balance sheet showing all the necessary data for these securities. Assume that Heiress exercises no significant influence over its investees.