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.
2009
- 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.
2010
- 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 investments are $65 per share for Platinum Gems, Inc.
Required:
1. Prepare the appropriate journal entry for each transaction or event.
2. Show the amounts that would be reported on the company's 2009 income statement relative to these investments.