Problem d on July 15 2012400 shares of Rome Company 720 par

Problem d on July 15, 2012,400 shares of Rome Company $720 par value capital , 20 stock at $698.40 Company are plus a broker\'s commission of S1,728. On August 1,2012, Paris at $756 per share les is Company idend of $8.64 per share. On November 3, 2012, it sold 200 of these shares On August 1,2012, Par less a broker\'s c ommission of $1,152. On December l·2 hare 1,2012, Rome Company rising a 100% stock dividend declared on its capital stock on November 18. 012, the end of Paris Company\'s calendar-year accounting period, the tation for Rome Company\'s common stock was $331.20 per share. The decline was market quotation considered to be temporary are journal entries to record last entry appear in the financial statements? mpoappconourp all ofthese data assuming the securities are considered investments classified as trading securities. Where should the accounts in the a. Prep b. Assume Rome Company has become a major customer so the shares are held for long-term affiliation purposes. Indicate how the investment should be shown in the balance sheet.

Solution

ANSWER:

a)

15 july 2012 Investment A/c Dr. 279360

Brokerage A/c Dr. 1728

To bank/cash A/c 281088

(Being shares purchased as temporary

investments)

1 aug 2012 cash/ bank A/c dr. 3456

To Dividend A/c 3456

( Being dividend recieved on 400 shares)

3 Nov 2012 bank/cash A/c Dr. 150048

Brokerage A/c Dr. 1152

To Investment A/c 139680 (698.40*200))

To profit on Investments 11520 (57.6*200)

( Being 200 Shares Sold)

1Dec 2012 Investments A/c Dr. 144000

To Dividend A/c 144000

(Being Dividend in form of stock given

by company (200*720*100%))

31 dec 2012 Investment Revaluation Reserve A/c Dr 73440

To InvestmentsA/c 73440

( being Investments revalued at end of the year

Decline = (698.40 - 331.20)*200 )

NOTE: The Investment account in last entry will appear in BALANCE SHEET in Head Current Assets as short term investments. And Inv Revaluation reserve will shown on liability side of balancesheet under head reserves and surplus)

B)

If these investments are held as Long term pupose then these investments will shown under head long term Assets on asset side of Balance sheet.