During January 2017, Long Corporation for the First Time Decided

question 130

Essay

During January 2017, Long Corporation for the first time decided to acquire some equity securities as a means of putting some of its idle cash to work. The securities are classified as trading securities. At March 31, when Long prepares its first quarter financial statements, the following information about the acquired securities is available:
Required:
a. Prepare the journal entries to record the acquisition in January and valuation at the end of the first quarter of 2017.
b. Assume that on June 30, 2017, the company still has this same portfolio. The market value of 1 is $57,000, 2 is $30,000, and 3 is $31,000. What journal entry, if any, should be prepared at the end of the second quarter?
c. On August 15, 2017, Long Corporation sold Security 3 for $33,000. Prepare the journal entry to record this transaction.

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Definitions:

Ending Inventory

The total value of goods available for sale at the end of an accounting period, calculated as the beginning inventory plus purchases minus cost of goods sold (COGS).

Lower-of-cost-or-market

An accounting principle requiring that inventory be recorded at the lower of either its original cost or its current market price.

Ending Inventory

The final stock level of products or materials that a company has in hand at the close of an accounting period, rephrased as "terminal inventory balance."

Periodic Inventory System

An inventory system that updates the count and valuation of stock at specific intervals, rather than continuously.