Question

Fernandez Corp. invested its excess cash in securities during 2020. As of December 31, 2020, the securities portfolio consisted of the following common stocks. Security Quantity Cost Fair Value Lindsay Jones, Inc. 1,000 shares $15,000 $21,000 Poley Corp. 2,000 shares 40,000 42,000 Arnold Aircraft 2,000 shares 72,000 60,000 Totals $127,000 $123,000 Correct answer iconYour answer is correct. What should be reported on Fernandez’s December 31, 2020, balance sheet relative to these securities? What should be reported on Fernandez’s 2020 income statement? (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Fernandez Corp. Balance Sheet (Partial) Equity Investments $ 123,000 Income Statement Unrealized Holding Gain or Loss - Income $ 4,000 eTextbook and Media List of Accounts Correct answer iconYour answer is correct. On December 31, 2021, Fernandez’s securities portfolio consisted of the following common stocks. Security Quantity Cost Fair Value Lindsay Jones, Inc. 1,000 shares $15,000 $20,000 Lindsay Jones, Inc. 2,000 shares 33,000 40,000 Duff Company 1,000 shares 16,000 12,000 Arnold Aircraft 2,000 shares 72,000 22,000 Totals $136,000 $94,000 During the year 2021, Fernandez Corp. sold 2,000 shares of Poley Corp. for $38,200 and purchased 2,000 more shares of Lindsay Jones, Inc. and 1,000 shares of Duff Company. What should be reported on Fernandez’s December 31, 2021, balance sheet? What should be reported on Fernandez’s 2021 income statement? (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Fernandez Corp. Balance Sheet (Partial) Equity Investments $ 94,000 Fernandez Corp. Income Statement (Partial) Loss on Sale of Investments $ 1,800 Unrealized Holding Gain or Loss - Income 38,000 eTextbook and Media List of Accounts New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is partially correct. On December 31, 2022, Fernandez’s securities portfolio consisted of the following common stocks. Security Quantity Cost Fair Value Arnold Aircraft 2,000 shares $72,000 $82,000 Duff Company 500 shares 8,000 6,000 Totals $80,000 $88,000 During the year 2022, Fernandez Corp. sold 3,000 shares of Lindsay Jones, Inc. for $39,900 and 500 shares of Duff Company at a loss of $2,700. What should be reported on the face of Fernandez’s December 31, 2022, balance sheet? What should be reported on Fernandez’s 2022 income statement? (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Fernandez Corp. Balance Sheet (Partial) Equity Investments $ 88,000 Fernandez Corp. Income Statement (Partial) Loss on Sale of Investments $ 10,800 Unrealized Holding Gain or Loss - Income____?

Answer 1

a) i) Equity investment shown in the Balance sheet = 123000

   ii) unrealised gain or loss shown in the balance sheet = 4000

If unrealised loss has already been considered in the income statement and balance sheet account, accounting treatment is quite right. Nothing is required to be done.

b) The shares of Poley corp. should not be the part of "Investment" of the company. Because it has been sold.

It has also been sold at the loss of $ 1800 in corrsponding to the cost value. This 1800$ should be adjusted from unrecognized income & expense. Because $ 1800 is actual loss incurred on the sale of ivestment.

c) 500 shares of Duff company has been sold at ehe loss of $2700. First of all, this loss should be adjusted from unrealised gain or loss account.

After that, loss on the sale of Lindsey joan will be recognised. again, first it will be recognized from unrecognised Gain & loss.