A On September 1 2012 Ramsey Company purchased the follow fo

A On September 1, 2012, Ramsey Company purchased the follow for investments classified as available-for-sale securities: I. Two thousand shares of Lacey Company capital stock at $43o commission of $5,760. 2. One thousand shares of Membrow Company capital stock at $705.60 plus brok commission of $5,040 er Cash dividends of $18.00 per share on the Lacey capital stock and $14 0 Membrow capital stock were received on December 7 and December er share 10, respectively On December 31, 2012, per share market values are Lacey, $460.80, and M a. Prepare journal entries to record these transactions. b. Prepare the necessary adjusting entry(ies) at December 31, 2012, to ber 31, 2012, to adjust he caming values assuming that market price changes are believed to be te the accounts appear in the financial statements? mpora

Solution

For Available for sale securities:

1. Measured at fair value at balance sheet date.

2. Changes in FV will be transferred to unrealized gains or losses.

3. interest or dividend revenues will be recognised in income statement.

Date	Particulars	Debit	Credit
1st Sep 2012	Available for sale Securities - Lacey(2000*439.2)+5760	8,84,160.00
	Available for sale Securities - Membrow(1000*705.6)+5040	7,10,640.00
	To Cash		15,94,800.00
	Being Shares purchased
07th Dec 2012	Cash(2000*18)	36,000.00
	To Dividend - Lacey		36,000.00
	Being dividend recognised in income statement
10th Dec 2012	Cash(1000*14.4)	14,400.00
	To Dividend - Membrow		14,400.00
	Being dividend recognised in income statement
31st Dec 2012	Available for Sale Securities - Lacey	37,440.00
	To unrealized holding gain or loss (2000*460.8)-884160		37,440.00
	Being change in fair value booked as unrealized gain
31st Dec 2012	Unrealized holding gain or loss (1000*655.2)-710640	55,440.00
	To Available for Sale Securities - Membrowy		55,440.00
	Being change in fair value booked as unrealized loss