**Assessing Financial Statement Effects of Trading and Available-for-Sale Securities** This template assists in recording four financial transactions involving investments in marketable securities. Below are the details of the transactions and how they impact the financial statements: 1. **Purchased 6,000 common shares of Liu, Inc., at $11.50 cash per share.** 2. **Received a cash dividend of $1.40 per common share from Liu.** 3. **Year-end market price of Liu common stock is $11.25 per share.** 4. **Sold all 6,000 common shares of Liu for $66,300.** **Instructions:** Use negative signs for negative values when filling out the financial statement template. ### Financial Statement Template: #### Balance Sheet: - **Transaction Columns:** Each transaction is recorded in separate rows across the following columns: - **Cash Asset:** Changes in cash from transactions. - **Noncash Assets:** Changes in noncash assets. - **Liabilities:** Changes in liabilities. - **Contributed Capital:** Changes in contributed capital. - **Earned Capital:** Changes in earned capital. #### Income Statement: - **Transaction Columns:** Each transaction impacts the income statement in these areas: - **Revenue:** Income earned from transactions. - **Expenses:** Costs associated with transactions. - **Net Income:** Resulting net income from revenue minus expenses. Use this template to track the impact of each transaction on both the Balance Sheet and Income Statement, ensuring a comprehensive understanding of their financial effects.

The objective of the question is to understand the financial statement effects of trading and available-for-sale securities by recording the given transactions.First, let's consider the purchase of 6,000 common shares of Liu, Inc., at $11.50 cash per share. This transaction will decrease the cash asset by $69,000 (6,000 shares * $11.50 per share) and increase the investment in marketable securities (a noncash asset) by the same amount.Second, the company received a cash dividend of $1.40 per common share from Liu. This transaction will increase the cash asset by $8,400 (6,000 shares * $1.40 per share) and will also increase the earned capital (dividend revenue) by the same amount.Third, the year-end market price of Liu common stock is $11.25 per share. This does not directly affect the financial statements, but it is used to calculate the unrealized gain or loss on the investment. In this case, the investment in Liu's shares has decreased in value by $1,500 (6,000 shares * ($11.50 - $11.25)) which is an unrealized loss and will decrease the earned capital.Finally, the company sold all 6,000 common shares of Liu for $66,300. This transaction will increase the cash asset by $66,300 and decrease the investment in marketable securities by $69,000 (the original cost). The difference of $2,700 is a realized loss and will decrease the earned capital.In summary, the transactions involving the purchase, receipt of dividends, change in market price, and sale of Liu's shares have various effects on the company's financial statements. They affect the cash and noncash assets, liabilities, contributed capital, and earned capital.

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