Measurement Issues Temporary Investments The major reporting and measurement issues associated with temporary investments are (1) determining initial cost, (2) recording periodic revenues, (3) recording sales, and (4) recording changes in value. Accounting for Initial Cost and Periodic Revenues All short-term investments are initially recorded at their acquisition cost. This amount includes the purchase price of the security plus any other costs, such as brokerage fees, associated with their acquisition. Revenue from temporary investment transactions is recorded as it is received. The revenue from investments in CDs, treasury bills, and bonds is termed interest. The revenue from investments in stock is termed dividends. To illustrate accounting for temporary investments, assume that on May 1, 1992, the Kemp Company acquires 182-day treasury bills at a total cost of $23,810. This transaction is recorded in the accounting records as follows: The maturity value of the treasury bills purchased by Kemp is $25,000. Therefore, the company makes the following general journal entry on October 30, 1992, when the temporary investment is paid on its maturity date: Accounting for Sales of Temporary Investments Revenue is also earned on temporary investments when they are sold at an amount that is greater than their purchase price. For example, assume the Kemp Company acquired 1,000 shares of the Bordon Company's common stock at a cost of $18.50 per share on June 1, 1992. The following general journal entry is recorded: Later, on September 15, 1992, Kemp Company sold all of the Bor-don stock for $19 per share. This amount is 5500 more than the acquisition price of the stock and results in revenue to Kemp in the form of a gain. Consequently, Kemp Company records the following general journal entry in its accounting records: The recorded gain is reported on Kemp's income statement. In the event that a temporary investment is sold for a price that is less than the original acquisition price, the result is a loss (Loss on Sale of Temporary Investments) that must be recorded on the date of the sale of the security. This loss is also reported on the income statement.