Manson Incorporated reported the following current asset on its December 31, 2006 balance sheet — Temporary investment available-for-sale securities cost 475

Manson Incorporated reported the following current asset on its December 31, 2006 balance sheet:

Temporary investment in available-for-sale securities (at cost) ………….. $63,475

Less: Allowance for change in value of investment ………………………. (2,980)

Temporary investment in available-for-sale securities (at fair value) …… $60,495

An analysis of Manson’s temporary investments on December 31, 2006 reveals the following:

.:.

During 2007 the following transactions related to Manson’s temporary investments occurred:

Jan. 6 Received a $265 dividend on the Turben Company common

Mar. 31 Received the semiannual dividend of $500 on the Web Engines preferred

On March 31, 2007 the following information is available concerning Manson’s temporary investments:

Equity Security Fair Value

Turben Company ………… $13,470

Cook Corp. ………………… 13,765

Hill Corp. ………………….. 18,940

Web Engines ………………. 15,500

June 30 Received a $375 dividend on the Cook Corp. common and a $700 dividend on the Hill Corp. common

On June 30, 2007 the following information is available concerning Manson’s temporary investments:

Equity Security Fair Value

Turben Company ……….. $13,300

Cook Corp. ………………. 14,125

Hill Corp. ………………… 19,300

Web Engines ……………… 15,400

July 6 Sold the Turben Company common for $13,750

Sept. 29 Received the semiannual dividend of $500 on the Web Engines preferred

On September 30, 2007 the following information is available concerning Manson’s temporary investments:

Equity Security Fair Value

Cook Corp. ………………. $14,230

Hill Corp. ………………….. 19,500

Web Engines ………………. 15,900

Nov. 2 Sold the Hill Corp. common for $19,780

Dec. 30 Received a $375 dividend on the Cook Corp. common

On December 31, 2007, the following information is available:

Equity Security Fair Value

Cook Investment Corp. ……… $14,280

Web Engines …………………… 16,400

Required

1. Assuming Manson prepares quarterly financial statements, prepare journal entries to record the preceding information.

2. Show the items of income or loss from temporary investment transactions that Manson reports for each quarter of 2007?

3. Show how Manson’s temporary investments are reported on the balance sheet on March 31, 2007; June 30, 2007; September 30, 2007; and December 31, 2007.

SOLUTION:

1. 2007

Jan. 6 Cash 265

Dividend Revenue 265

Mar. 31 Cash 500

Dividend Revenue 500

31 Allowance for Change in

Value of Investment 1,180*

Unrealized Increase/Decrease in

Value of Available-for-Sale

Securities 1,180

Cumulative

3/31/07 Change in

*Security Cost Fair Value Fair Value

400 shares of Turben Co. common stock $14,275 $13,470 $ (805)

500 shares of Cook Corp. common stock 12,650 13,765 1,115

700 shares of Hill Corp. common stock 17,450 18,940 1,490

200 shares of Web Engines preferred stock 19,100 15,500 (3,600)

Totals $63,475 $61,675 $(1,800)

$1,180 debit adjustment = $1,800 required ending credit balance - $2,980

($63,475 - $60,495) beginning credit balance

June 30 Cash ($375 + $700) 1,075

Dividend Revenue 1,075

30 Allowance for Change in Value

of Investment 450*

Unrealized Increase/Decrease in

Value of Available-for-Sale

Securities 450

Cumulative

6/30/07 Change in

*Security Cost Fair Value Fair Value

400 shares of Turben Co. common stock $14,275 $13,300 $ (975)

500 shares of Cook Corp. common stock 12,650 14,125 1,475

700 shares of Hill Corp. common stock 17,450 19,300 1,850

200 shares of Web Engines preferred stock 19,100 15,400 (3,700)

Totals $63,475 $62,125 $(1,350)

$450 debit adjustment = $1,350 required ending credit balance - $1,800

beginning credit balance