Question

The investments of Charger Inc. include a single investment:14,560 shares of Raiders Inc. common stock purchased on February24, 2016, for $38 per share including brokerage commission. Theseshares were classified as trading securities. As of the December31, 2016, balance sheet date, the share price had increased to $41per share.

Required:

A.Journalize the entries to acquire the investment on February24, and record the adjustment to fair value on December 31, 2016.Refer to the Chart of Accounts for exact wording of accounttitles.

B.

How is the unrealized gain or loss for trading investmentsreported on the financial statements?

CHART OF ACCOUNTS

Charger Inc.

General Ledger

ASSETS

110Cash

111Petty Cash

120Accounts Receivable

121Allowance for Doubtful Accounts

131Notes Receivable

132Interest Receivable

141Merchandise Inventory

145Office Supplies

146Store Supplies

151Prepaid Insurance

161Investments-Raiders Inc. Stock

165Valuation Allowance for Trading Investments

166Valuation Allowance for Available-for-Sale Investments

181Land

191Store Equipment

192Accumulated Depreciation-Store Equipment

193Office Equipment

194Accumulated Depreciation-Office Equipment

LIABILITIES

210Accounts Payable

221Notes Payable

231Interest Payable

241Salaries Payable

251Sales Tax Payable

EQUITY

311Common Stock

312Paid-In Capital in Excess of Par-Common Stock

321Preferred Stock

322Paid-In Capital in Excess of Par-Preferred Stock

331Treasury Stock

332Paid-In Capital from Sale of Treasury Stock

340Retained Earnings

350Unrealized Gain (Loss) on Available-for-Sale Investments

351Cash Dividends

352Stock Dividends

390

Income Summary

A. Journalize the entries to acquire the investment on February24, and record the adjustment to fair value on December 31, 2016.Refer to the Chart of Accounts for exact wording of accounttitles.

PAGE 10

JOURNAL

DATEDESCRIPTIONPOST. REF.DEBITCREDIT

1

2

3

Adjusting Entries

4

5