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You are working for The Wellington Company on temporary assignment while one of the accountants is on family leave. You have been asked to review the companys investment journal entries and provide necessary information to the accountant preparing the financial statements.

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JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1	Jan. 17	Investment-Red Rock Co. Stock		39,600.00
2		Cash			39,600.00
3	Feb. 5	Investment-Sunset Village Bonds		36,000.00
4		Interest Receivable		310.00
5		Cash			36,310.00
6	23	Investment-Mays and Co. Stock		27,000.00
7		Cash			27,000.00
8	Mar. 31	Cash		360.00
9		Interest Receivable			310.00
10		Interest Revenue			50.00
11	Apr. 6	Investment in Minions Corp. Stock		180,000.00
12		Cash			180,000.00
13	30	Cash		750.00
14		Dividend Revenue			750.00
15	Jul. 1	Cash		20,802.00
16		Loss on Sale of Investments		2,808.00
17		Interest Revenue			210.00
18		Investment-Sunset Village Bonds			23,400.00
19	Aug. 14	Cash		41,300.00
20		Gain on Sale of Investments			1,800.00
21		Investment-Harding Construction Stock			39,500.00
22	27	Cash		3,600.00
23		Investment in Minions Corp. Stock			3,600.00
24	Sep. 22	Cash		30,500.00
25		Gain on Sale of Investments			3,500.00
26		Investment-Mays and Co. Stock			27,000.00
27	30	Cash		150.00
28		Interest Revenue			150.00
29	Nov. 1	Investment in Minions Corp. Stock		21,600.00
30		Income of Minions Corp.			21,600.00
31	Dec. 31	Unrealized Loss on Available-For-Sale Investments		3,275.00
32		Valuation Allowance for Available-For-Sale Investments			3,275.00
33	31	Valuation Allowance for Trading Investments		2,150.00
34		Unrealized Gain on Trading Investments			2,150.00

Financial Statements and Valuation

The accountant preparing the financial statements has asked you to provide the fair value as of the end of the year for the investments. Present the information as it would be shown on the financial statements. Last year, The Wellington Company reported costs of $68,000 in trading investments and $82,000 in available-for-sale investments. Refer to the journal entries shown on The Wellington Company panel. Assume that all investments sold during this year were trading investments and that purchases during the year were new investments.

1. Select the correct label for each line and fill in the amount. In classifying the investments, choose a categorization which seems most likely, given the pattern of transactions in the journal entries. Enter all amounts as positive numbers. If an amount box does not require an entry, leave it blank.

Trading Securities

Available-For-Sale Securities

	2. Where on the balance sheet do trading securities appear?
	3. Where in the financial statements do available-for-sale securities NOT appear?
	4. Where are held-to-maturity securities reported? Based on the journal entries for this year, does the company have any held-to-maturity securities?
	5. Where are securities held for strategic reasons reported in the financial statements when using the equity method? Based on the journal entries for this year, does The Wellington Company have any equity securities?

6. Which of the items below does not affect net income? Check all that apply.

unrealized gain on available-for-sale securities

both gains and losses of any sort for all investments

realized gain on trading securities

only unrealized gains or losses for all investments

none of these answers is correct

unrealized loss on trading securities

realized loss on available-for-sale securities

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