Question

Marino Corporation purchased the following portfolio of trading securities during 2008 and reported the following balances at December 31, 2008. No sales occurred during 2008. All declines are considered to be temporary.

Security Cost Market Value at 12/31/08
X $ 80,000 $ 82,000
Y 140,000 132,000
Z 32,000 28,000

The only transaction in 2009 was the sale of security Z for $34,000 on December 31, 2009. The market values for the other securities at December 31, 2009, were the same as at December 31, 2008. Marino's entry to record the sale of security Z would include

Answer 1

Marino Corporation's journal entry for the sale of security Z would include a debit to cash for $34,000, a credit to trading securities for $32,000, and a credit to gains on sale of securities for $2,000.

Step-by-step explanation:

The sale of security Z by Marino Corporation would require an accounting journal entry that reflects the sale price, the cost of security Z, and the resulting gain. Since Marino bought the security at a cost of $32,000 and sold it for $34,000, the company realized a gain of $2,000.

The entry would debit cash for the sale proceeds of $34,000, credit trading securities for the original cost of $32,000, and credit gains on sale of securities for the $2,000 gain. The balances for securities X and Y would remain unchanged, as the market values at December 31, 2009, are the same as the previous year and no other transactions occurred.