Short-term investments (marketable securities) are highly liquid equity or debt securities (e.g., Coca-Cola stock), reported immediately after cash in the balance sheet as current assets unless held over a year (then noncurrent). They’re valued at fair market value, reflecting current prices (e.g., Microsoft’s $125.3 billion). Transactions for Foster Corporation:
Purchase: Dec. 1, 4,000 Coca-Cola shares at $48.98 each + $80 commission = $196,000 (Marketable Securities debit, Cash credit; cost/share = $49).
Dividend Revenue: Dec. 15, $0.30/share × 4,000 = $1,200 (Cash debit, Dividend Revenue credit), reported in the income statement.
Sale: Dec. 18, 500 shares at $50.04 each – $20 commission = $25,000; cost = $49 × 500 = $24,500; gain = $500 (Cash debit $25,000, Marketable Securities credit $24,500, Gain credit $500). Losses occur if sold below cost. These entries track cost, revenue, and gains/losses, ensuring liquidity and income are accurately reflected, with a subsidiary ledger detailing individual investments.