31) Which statement is FALSE?
A) Available-for-sale securities are held with the intent of selling them some time in the future.
B) Held-to-maturity securities are stock investments that the investor has the intent and ability to hold until they mature.
C) Trading securities are debt and stock investments purchased and expected to be sold in the near term through active trading.
D) A debt security not classified as either trading or held-to-maturity is an available-for-sale security.
32) Which statement is TRUE?
A) Available-for-sale securities are debt securities only.
B) Trading securities are debt securities only.
C) Held-to-maturity securities are debt securities only.
D) Held-to-maturity securities are reported as long-term assets only.
33) Smith Corporation purchases $620,000 of TMI Corporation stock on October 18, 2015. Smith Corporation classifies this investment as a trading security. On December 1, Smith Corporation received a cash dividend of $12,000 on the TMI Corporation stock. On December 31, 2015, Smith Corporation's investment in TMI Corporation has a fair value of $600,000.
Required:
Prepare the necessary journal entries. Explanations are not required.
34) Jones Company purchases 1,000 shares of Microsoft Corporation stock at $34 per share on July 31. The company expects to hold the stock for 6 months and then sell it. At December 31, the market price of the stock is $32 per share.
Required:
1.What type of investment is this for Jones Company? Explain your answer.
2.Journalize the purchase on July 31 and the necessary adjustment on December 31. Explanations are not required.
3.Discuss how Jones Company would report this investment on its balance sheet at December 31 and any gain or loss on its income statement for the year ended December 31.