P17-6 (Trading and Available-for-Sale Securities Entries) McElroy Company has the following portfolio
of investment securities at September 30 2012 its last reporting date.
Trading Securities Cost Fair Value
Horton Inc. common (5000 shares) $215000 $200000
Monty Inc. preferred (3500 shares) 133000 140000
Oakwood Corp. common (1000 shares) 180000 179000
On October 10 2012 the Horton shares were sold at a price of $54 per share. In addition 3000 shares of
Patriot common stock were acquired at $54.50 per share on November 2 2012. The December 31 2012 fair
values were: Monty $106000 Patriot $132000 and the Oakwood common $193000. All the securities are
classified as trading.
(a) Prepare the journal entries to record the sale purchase and adjusting entries related to the trading
securities in the last quarter of 2012.
(b) How would the entries in part (a) change if the securities were classified as available-for-sale?
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