Reference no: EM132582513

Perry Company had no short-term investments prior to year 2011. It had the following transactions involv- ing short-term investments in available-for-sale securities during 2011.

Apr. 16 Purchased 8,000 shares of Gem Co. stock at $24.25 per share plus a $360 brokerage fee.May 1 Paid $200,000 to buy 90-day U.S.Treasury bills (debt securities): $200,000 principal amount, 6% interest, securities dated May 1.

July 7 purchase 4000 share of Pepsico stock at $49.25 per share plush $350 bookerage fee20 Purchased 2,000 shares of Xerox stock at $16.75 per share plus a $410 brokerage fee.

Aug. 3 Received a check for principal and accrued interest on the U.S. Treasury bills that matured on July 29.

15 Received an $0.85 per share cash dividend on the Gem Co. stock.

28 Sold 4,000 shares of Gem Co. stock at $30 per share less a $450 brokerage fee.

Oct. 1 Received a $1.90 per share cash dividend on the PepsiCo shares

Dec. 15 Received a $1.05 per share cash dividend on the remaining Gem Co. shares.

31. Received a $1.30 per share cash dividend on the PepsiCo shares.

Required

Question 1: Prepare journal entries to record the preceding transactions and events.

Question 2: Prepare a table to compare the year-end cost and fair values of Perry's short-term investments inavailable-for-sale securities. The year-end fair values per share are: Gem Co., $26.50; PepsiCo, $46.50;and Xerox, $13.75.

Question 3: Prepare an adjusting entry, if necessary, to record the year-end fair value adjustment for the portfolioof short-term investments in available-for-sale securities.Analysis Component

Question 4: Explain the balance sheet presentation of the fair value adjustment for Perry's short-term investments.

Question 5: How do these short-term investments affect Perry's (a) income statement for year 2011 and (b) theequity section of its balance sheet at year-end 2011?