Question

In: Accounting

Bonita, Inc. had the following equity investment portfolio at January 1, 2017. Evers Company 960 shares...

Bonita, Inc. had the following equity investment portfolio at January 1, 2017.

Evers Company 960 shares @ $14 each $13,440
Rogers Company 880 shares @ $20 each 17,600
Chance Company 520 shares @ $10 each 5,200
Equity investments @ cost 36,240
Fair value adjustment (7,300 )
Equity investments @ fair value $28,940


During 2017, the following transactions took place.

1. On March 1, Rogers Company paid a $2 per share dividend.
2. On April 30, Bonita, Inc. sold 320 shares of Chance Company for $11 per share.
3. On May 15, Bonita, Inc. purchased 100 more shares of Evers Company stock at $17 per share.
4. At December 31, 2017, the stocks had the following price per share values: Evers $18, Rogers $19, and Chance $9.


During 2018, the following transactions took place.

5. On February 1, Bonita, Inc. sold the remaining Chance shares for $9 per share.
6. On March 1, Rogers Company paid a $2 per share dividend.
7. On December 21, Evers Company declared a cash dividend of $3 per share to be paid in the next month.
8. At December 31, 2018, the stocks had the following price per share values: Evers $20 and Rogers $21.

Prepare journal entries for each of the above transactions.

Solutions

Expert Solution

2017 Debit Credit
1 Mar-01 Cash $    1,760.00
Dividend Revenue $    1,760.00
2 Apr-30 Cash $    3,520.00
Gain on Sale of Invoice $        320.00
Equity Investments(Avail. For Sale) $    3,200.00
3 May-15 Equity Investments $    1,700.00
Cash $    1,700.00
4 Dec-31 Fair Value Adjustments (Avail for Sale) $ 10,160.00
Unrealized Holding (Gain or Loss)Equity $ 10,160.00
2018
5 Feb-01 Cash $    1,800.00
Loss on Sale of Invoice $        200.00
Equity Investments(Avail. For Sale) $    2,000.00
6 Mar-01 Cash $    1,760.00
Dividend Revenue $    1,760.00
7 Dec-21 Dividends Receivable 3180
Dividend Revenue 3180
8 Dec-31 Fair Value Adjustments (Avail for Sale) $ 14,240.00
Unrealized Holding (Gain or Loss)Equity $ 14,240.00

Working Notes-

Cost Fair Value Unrealized Gain (Loss)
Evers Company $ 15,140.00 $ 19,080.00 $                               3,940.00
Rogers Company $ 17,600.00 $ 16,720.00 $                                 (880.00)
Chance Company $    2,000.00 $    1,800.00 $                                 (200.00)
Total $ 34,740.00 $ 37,600.00 $                               2,860.00
Previous securities fair value adjustment bal.—Cr $                             (7,300.00)
Securities fair value adjustment—Dr. $                             10,160.00
Cost Fair Value Unrealized Gain (Loss)
Evers Company $ 15,140.00 $ 21,200.00 $                             6,060.00
Rogers Company $ 17,600.00 $ 18,480.00 $                                 880.00
Total $ 32,740.00 $ 39,680.00 $                             6,940.00
Previous securities fair value adjustment bal.—Cr $                           (7,300.00)
Securities fair value adjustment—Dr. $                           14,240.00

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