Recording and Valuing Trading Securities Myers Associates r

Recording and Valuing Trading Securities

Myers & Associates reports the following information on its December 31, 2011, balance sheet:

Supporting records of Myers\' trading securities portfolio show the following debt and equity securities:

Interest dates on the treasury bonds are January 1 and July 1. Myers & Associates uses the revenue approach to record the purchase of bonds with accrued interest. During 2012 and 2013, Myers & Associates completed the following transactions related to trading securities:

1. Prepare journal entries for the preceding transactions and to accrue interest on December 31, 2012. Ignore any amortization of premium or discount on U.S. Treasury bonds. Round your answers to the nearest dollar. For compound transactions, if an amount box does not require an entry, leave it blank.

2012, Jan. 1

  

  

  

  

Apr. 1

  

  

  

  

  

  

  

  

  

  

  

  

To record sale of 7 1/2% Treasury bonds.

May 21

  

  

  

  

To record receipt of Conway Co. common dividend.

July 1

  

  

  

  

To record receipt of interest on U.S. Treasury bonds.

July 1

  

  

  

  

  

  

  

  

  

To record sale of 7% U.S. Treasury bonds.

Aug. 15

  

  

  

  

To record purchase of Nieman Inc. common stock.

Nov. 1

  

  

  

  

  

  

  

  

  

To record purchase of 8% U.S. Treasury bonds.

Dec. 31

  

  

  

  

To accrue interest on U.S. Treasury bonds.

Dec. 31

  

  

  

  

To adjust for decline of securities.

2013, Jan 2

  

  

  

  

To record receipt of bond interest.

Feb. 1

  

  

  

  

  

  

  

  

  

  

  

  

To record sale of 7 1/2% U.S. Treasury bonds.

Hide 1. Prepare journal entries for the preceding transactions and to accrue interest on December 31, 2012. Ignore any amortization of premium or discount on U.S. Treasury bonds. Round your answers to the nearest dollar. For compound transactions, if an amount box does not require an entry, leave it blank. 2012, Jan. 1 Apr. 1 To record sale of 7 1/2% Treasury bonds. May 21 To record receipt of Conway Co. common dividend. July 1 To record receipt of interest on U.S. Treasury bonds. July 1 To record sale of 7% U.S. Treasury bonds. Aug. 15 To record purchase of Nieman Inc. common stock. Nov. 1 To record purchase of 8% U.S. Treasury bonds. Dec. 31 To accrue interest on U.S. Treasury bonds. Dec. 31 To adjust for decline of securities. 2013, Jan 2 To record receipt of bond interest. Feb. 1 To record sale of 7 1/2% U.S. Treasury bonds.

Solution

Journal Entry Debit Credit 2012, Jan 1 Cash A/c 7300 To Interest Receivable on treasury Bond 7300 (80000*7%+120000*7.5%)/2 Apr. 1 Cash 62500 Brokerage Fees 200 To US treasury 7 1/2 % Bonds(FMV) -101.575 60945 To Profit on Sale of Bond 255 To Interest receivable on Bond 1500 Interest on 60000*7 1/2 for 4 months May. 21 Cash 50 To dividend Income 50 200*0.25 July .1 Cash A/c 4350 To Interest Received 4350 ((60000*7%)+(60000*7.5%))/2 July .1 Cash 77750 Brokerage Fees 250 To Profit on Sale of Bond 600 To 7 1/2 % US Treasury Bond 77400 Aug.15 Purchase shares of Niemen Inc 11600 To Cost 11600 Nov.1 8% US Treasury Bonds 50500 Accrued interest paid 1333 To Cash 51833 (50000*8%*4/12) Dec.31 7 1/2% US treasury Bond(61050-60945) 105 Shares of Niemen Inc 75 Loss on revaluation of securities 2120 To Conway Co shares 2300 Dec.31 Interest Receivable on Bonds 4250 To Interest Received 4250 (8%*50000+7.5%*60000)/2 Jan.2 Cash 4250 To Interest receivable on bonds 4250 Feb.1 Cash 60675 Brokerage Fees 300 Loss on Sale of Bond 75 To 7 1/2 % US treasury Bond 61050 Interest Accrued on Bond(60000*7.5%*1/12) 375