Prepare General Journal Entries to Record the Following Transactions for the Elite

question 30

Essay

Prepare general journal entries to record the following transactions for The Elite Corp in its first year of operations:
(a)On May 4,as a short term investment purchased 700 shares of Value Corp.for $70/share,paying a $500 brokerage fee.
(b)On July 1,received $2.00 per share cash dividend on the Value Corp.shares.
(c)On September 15,sold 500 Value Corp.shares for $120 per share,incurring a $500 brokerage fee.
(d)The December 31 fair value of the company's short-term investment in Value Corp revealed a $2,000 unrealized gain.

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Definitions:

Interest Rate Parity

A financial theory stating that the difference in interest rates between two countries will be offset by changes in the exchange rate between their currencies.

Covered Interest Arbitrage

The practice of exploiting the interest rate differential between two countries while hedging against exchange rate risk using forward contracts.

Portfolio's Beta

A measurement that indicates the volatility, or systematic risk, of a portfolio relative to the overall market.

S&P500 Value

The numerical value representing the collective performance of the 500 largest companies listed on stock exchanges in the United States, as measured by the Standard & Poor's index.