Question

During 2018, Colorado Company stock was sold for $9,400. The fair value of the stock on December 31, 2018, was Clemson Corp. stock—$19,100; Buffaloes Co. stock—$20,500. None of the equity investments result in significant influence. (a) Prepare the adjusting journal entry needed on December 31, 2017. (b) Prepare the journal entry to record the sale of the Colorado Co. stock during 2018. (c) Prepare the adjusting journal entry needed on December 31, 2018.

Answer 1

Step-by-step explanation:

The journal entries are as follows

a. Unrealized Holding Gain or Loss Dr $1,310

To Fair value Adjustment $1,310

(Being the unrealized gain or loss is recorded)

2. Cash $9,410

Loss on Sale of Investment $490 ($9,900 - $9,410)

To Equity Investment $9,900

(Being the sale of the stock is recorded)

3. Fair value Adjustment $1,020

To Unrealized Holding Gain or Loss $1,020

(Being the fair value adjustment is recorded)

The computation is shown below:

Stock Cost Fair Value Unrealized Gain(Loss)

Clemson Corp. Stock $20,200 $19,410 -$790

Buffaloes Co. stock $20,200 $20,700 $500

Net unrealized gain (loss) -$290

2017 -$1,310

Fair value adjustment -$1,020