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Parnell Industries buys securities to be available for sale when

circumstances warrant, not to profit from short-term differences in price and


not necessarily to hold debt securities to maturity. The following selected
transactions relate to investment activities of Parnell Industries whose fiscal
year ends on December 31. No investments were held by Parnell at the
beginning of the year.
2016
March 1 Purchased 2 million Platinum Gems, Inc. common shares for
$124 million, including brokerage fees and commissions.
April 13 Purchased $200 million of 10% bonds at face value from
Oracle Wholesale Corporation.
July 20 Received cash dividends of $3 million on the investment in
Platinum Gems, Inc. common shares.
October 13 Received semiannual interest of $10 million on the investment
in Oracle bonds.
October 14 Sold the Oracle bonds for $205 million.
November 1 Purchased 500,000 SPI International preferred shares for $40
million, including brokerage fees and commissions.
December 31 Recorded the necessary adjusting entry(s) relating to the
investments. The market prices of the investments are $64 per
share for Platinum Gems, Inc. and $74 per share for SPI
International preferred shares.
Required:
1. Prepare the appropriate journal entry for each transaction or event.
2. Show the amounts that would be reported on the companys 2016 income
statement relative to these investments.

2017
January 25 Sold half the Platinum Gems, Inc. shares for $65 per share.
March 1 Sold the SPI International preferred shares for $78 per share.
December 31 Recorded the necessary adjusting entry(s) relating to the
investments. The market price of the investment is $68 per
share for Platinum Gems, Inc.



EXERCISES
In Class #1
Various
transactions related
to securities
available for sale


At December 31, 2016, McKnight Brothers Corp. had the following
investments that were purchased during 2000, its first year of operations:
Cost Fair Value
Trading Securities:
Security A $ 700,000 $ 725,000
B 210,000 200,000
Totals $ 910,000 $ 925,000

Securities Available for Sale:
Security C $ 500,000 $ 560,000
D 850,000 865,000
Totals $1,350,000 $1,425,000

Securities to Be Held to Maturity:
Security E $ 970,000 $ 980,000
F 412,000 409,000
Totals $1,382,000 $1,389,000

No investments were sold during 2016. All securities except Security D
and Security F are considered short-term investments. None of the market
changes is considered permanent.
Required:
Determine the following amounts at December 31, 2016:
1. Investments reported as current assets.
2. Investments reported as noncurrent assets.
3. Unrealized gain (or loss) component of income before taxes.
4. Unrealized gain (or loss) component of shareholders equity.



As a long-term investment at the beginning of the fiscal year, Paper
Products International purchased 35% of Reeds Restaurant Supplies, Inc.s 12
million shares for $73 million. The fair value and book value of the shares
were the same at that time. During the year, Reeds Restaurant Supplies
earned net income of $20 million and distributed cash dividends of $1.10 per
share. At the end of the year, the fair value of the shares is $59 million.
Required:
Prepare the appropriate journal entries from the purchase through the end of
the year.




In Class #2
Various investment
securities

In Class #3
Equity method;
purchase; investee
income; dividends