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Problem
While reviewing the March 31, 2012, balance sheet of Business Solutions, Santana Rey notes that the business has built a large cash balance of $68,057. Its most recent bank money market statement shows that the funds are earning an annualized return of 0.75%, so Rey decided to make several investments with the desire to earn a higher return on the idle cash balance. Accordingly, in April, 2012, Business Solutions makes the following investments in trading solutions:
April 16 - Purchase 400 shares of Johnson & Johnson at $50 per share plus $300 commission.
April 30 - Purchase 200 shares of Starbucks Corporation at $22 per share plus $250 commission.
Questions:
1. Prepare journal entries to record the April purchases of trading securities by Business Solutions.
2. On June 30, 2012, the per share market price (fair value) of the Johnson & Johnson shares is $55 and the Starbucks shares is $19. Prepare the adjusting entry to record any necessary fair value adjustment to its portfolio of trading securities.
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