Jets Bancorp Inc. purchased a portfolio of trading securities during 2014.

Jets Bancorp Inc. purchased a portfolio of trading securities during 2014. The cost and fair value of this portfolio on December 31, 2014, was as follows:



Name Number of Shares Total Cost Total Fair Value
Dolphins Inc. 1,400 $28,000 $30,800
Marino Company 1,200 30,000 27,600
Namath Company 800 28,000 26,400
Total $86,000 $84,800



On May 10, 2015, Jets Bancorp Inc. purchased 1,000 shares of Giants Inc. at $24 per share plus a $150 brokerage fee.

Provide the journal entries to record the following:

a. The adjustment of the trading security portfolio to fair value on December 31, 2014.

b. The May 10, 2015, purchase of Giants Inc. stock.


Answer:

2014
a. Dec. 31 Unrealized Loss on Trading Investments 1,200
Valuation Allowance for Trading
Investments 1,200
To record decrease in fair value
of trading investments, $84,800 –
$86,000.
2015
b. May 10 Investments—Giants, Inc.* 24,150
Cash 24,150
*(1,000 shares × $24 per share) + $150

Ex 1-1 Types of businesses

The following is a list of well-known companies.

1. Alcoa Inc.
2. Boeing
3. Caterpillar
4. Citigroup Inc.
5. CVS
6. Dow Chemical Company
7. eBay Inc.
8. FedEx
9. Ford Motor Company
10. Gap Inc.
11. H&R Block
12. Hilton Hospitality, Inc.
13. Procter & Gamble
14. SunTrust
15. Walmart Stores, Inc.

a. Indicate whether each of these companies is primarily a service, merchandise, or manufacturing business. If you are unfamiliar with the company, use the Internet to locate the company’s home page or use the finance Web site of Yahoo (http://finance .yahoo.com).

b. For which of the preceding companies is the accounting equation relevant?

Answer:
a.
1. manufacturing    6. manufacturing    11. service
2. manufacturing    7. service          12. service
3. manufacturing    8. service          13. manufacturing
4. service          9. manufacturing    14. service
5. merchandise     10. merchandise      15. merchandise

b.  The accounting equation is relevant to all companies. It serves as the basis of the accounting information system.