Question

1. C has the following investments it bought during 2012. C still owns the stocks as of 12-31-14.

Original               Fair Value          

Cost        12-31-12       12-31-13       12-31-14

Jungle stock $20,000       $21,000       $24,000       $27,000

Regal stock $40,000       $41,000       $35,000       $42,000

Evan stock $14,000       $15,000       $17,000       $13,000

Leia stock $36,000       $37,000       $55,000

None of the stocks pay C a dividend. On 04-14-14, C sold all of the Leia stock for $54,000.

Assume C only prepares AJEs every December 31. Prepare the entries C should make on:

1. December 31, 2012.
2. December 31, 2013.
3. April 14, 2014.
4. December 31, 2014.

Answer 1

	Adjusting entries in the books of C
Date	Description	Debit	Credit
31-Dec-12	Fair value adjustment-Jungle Stock	$1,000
	Unrealised gain on fair value adjustment		$1,000
	(To record unrealised gain due to increase in fair value)
31-Dec-12	Fair value adjustment-Regal Stock	$1,000
	Unrealised gain on fair value adjustment		$1,000
	(To record unrealised gain due to increase in fair value)
31-Dec-12	Fair value adjustment-Evan Stock	$1,000
	Unrealised gain on fair value adjustment		$1,000
	(To record unrealised gain due to increase in fair value)
31-Dec-12	Fair value adjustment-Leia Stock	$1,000
	Unrealised gain on fair value adjustment		$1,000
	(To record unrealised gain due to increase in fair value)
31-Dec-13	Fair value adjustment-Jungle Stock	$3,000
	Unrealised gain on fair value adjustment		$3,000
	(To record unrealised gain due to increase in fair value)
31-Dec-13	Unrealised loss on fair value adjustment	$6,000
	Fair value adjustment-Regal Stock		$6,000
	(To record unrealised loss due to decrease in fair value)
31-Dec-13	Fair value adjustment-Evan Stock	$2,000
	Unrealised gain on fair value adjustment		$2,000
	(To record unrealised gain due to increase in fair value)
31-Dec-13	Fair value adjustment-Leia Stock	$18,000
	Unrealised gain on fair value adjustment		$18,000
	(To record unrealised gain due to increase in fair value)
14-Apr-14	Cash	$54,000
	Loss on sale of investment in stock	$1,000
	Investment in Stock		$36,000
	Fair value adjustment-Leia Stock		$19,000
	(To record sale of Leia stock)
31-Dec-14	Fair value adjustment-Jungle Stock	$3,000
	Unrealised gain on fair value adjustment		$3,000
	(To record unrealised gain due to increase in fair value)
31-Dec-14	Fair value adjustment-Regal Stock	$7,000
	Unrealised gain on fair value adjustment		$7,000
	(To record unrealised gain due to increase in fair value)
31-Dec-14	Unrealised loss on fair value adjustment	$4,000
	Fair value adjustment-Evan Stock		$4,000
	(To record unrealised loss due to decrease in fair value)