Real-Time Corporation is a diversified company that uses an investment portfolio to manage its liquidity

Real-Time Corporation is a diversified company that uses an investment portfolio to manage its liquidity
and to enhance earnings. Their fiscal year ends on December 31. On October 1, 2010, its investment
portfolio consists of the following securities:
Date
Purchased
07/01/10

Issuer

Description

Cost

Maslow Company

1,000,000 shares of preferred
stock; will be held indefinitely

$20,000,000

Market Value
09/30/2010
$19,400,000

08/02/10

Cardinal
Publishing

250,000 shares of common stock;
will be held unless needed for
liquidity

$ 3,750,000

$ 4,500,000

09/30/10

Bardco Furniture

$10,000,000 face value, 8 percent
bonds, maturing April 15, 2019;
interest paid semi-annually on
October 15 and April 15; may be
sold if needed for liquidity purposes

$10,000,000

$10,000,000

Real-Time Corporation made all of the appropriate adjusting entries on September 30, 2010. During the
last quarter of 2010 and the first few days of 2011, Real-Time Corporation had the following investment
transactions:
2010
Oct 1

Purchased U.S. Treasury Bonds for $2,300,000; the bonds mature in 2012 and bear
interest at 5 percent, paid semiannually on September 30 and March 30. Real-Time
Corporation anticipates that interest rate changes will force bond prices up in the next
month and will sell these bonds at that time.

Oct 15

Received semiannual interest on Bardco Bonds.

Oct 31

Sold the U.S. Treasury Bonds for $2,400,000 plus accrued interest.

Nov 1

Purchased $30,000,000 of Zardinia Corporation’s bonds to yield 9 percent and paid
$31,951,190. The bonds pay interest semiannually on April 30 and October 31 at the
stated rate of 10 percent. Real-Time Corporation plans to hold these bonds to their
maturity date, which is October 31, 2020.

Nov 30

Sold the Bardco Bonds for $9,000,000 plus accrued interest because rising interest rates
are expected to cause the value of the bonds to continue to decline.

Dec 1

Purchased 500,000 Nazdak Corporation common stock, $1 par, for $18 per share. This
investment was made in anticipation of an increase in the price of the company’s stock,
at which point it will be sold.

Dec 15

Received $.50 per share in dividends on the Maslow Company stock.

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ACC5328 Financial Accounting III
© 2011 South University

Dec 31

2011

Created any schedules needed to record adjusting entries for the investment portfolios,
and prepared the adjusting entries. Market values for the investments on December 31,
2010, were as follows:
Maslow Company
Zardinia Corporation
Nazdak Corporation
Cardinal Publishing

$20,700,000
$29,700,000
$8,500,000
$4,100,000

Jan 2

Sold $10,000,000 of the Zardinia Corporation bonds for face value.

Jan 5

Sold all of the Nazdak shares at a price of $20 per share.

Jan 10

Sold all of the Cardinal Publishing shares for $17.50 per share.

Page 2 of 2
ACC5328 Financial Accounting III
© 2011 South University

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