Question
In: Accounting
8. The accounting records of Jamaican Importers, Inc., at January 1, 2018, included the following: Assets...
8. The accounting records of Jamaican Importers, Inc., at January 1, 2018, included the following:
Assets Investment in IBM common shares $1,895,000 Less: Fair value adjustment (200,000) ____________ $1,695,000
No changes occurred during 2018 in the investment portifolio.
Required: Prepare appropriate adjusting entry(s) at December 31, 2018, assuming the fair value of the IBM common shares was
1. $1,331,000 2. $1,770,000 3. $1,920,000
(If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Record the fair value adjustment assuming the fair value of the IBM common shares was $1,331,000.
| Transaction | General Journal | Debit | Credit |
| 1 | |||
Solutions
Expert Solution
Ans.
(1)
| General Journal | Debit | Credit |
| Unrealized holding gains and losses | $364,000 | |
| To investment in IBM common shares | $364,000 | |
(2)
| General Journal | Debit | Credit |
| investment in IBM common shares | $125,000 | |
| To unrealized holding gains and losses | $125,000 |
(3)
| General Journal | Debit | Credit |
| investment in IBM common shares | $225,000 | |
| To unrealized holding gains and losses | $225,000 |
Explanation:
(1)
| Available for sale securities | Cost | Fair value | Accumulated Unrealized gain(loss) |
| IBM-shares - 31 Dec 2018 | $1,895,000 | $1,331,000 | ($564,000) |
Moving from a negative $200,000 Jan-1 to a negative $564,000 requires a reduction of $364,000
| Fair value Adjustment | |
| Balance needed in fair value adj. | ($564,000) |
| Existing balance in fair value adj. | ($200,000) |
| Increase (decrease) needed in fair value adj. | ($364,000) |
Fair value adjustment = ($1,331,000 - $1,695,000) = $364,000
(2)
| Available for sale securities | Cost | Fair value | Accumulated Unrealized gain(loss) |
| IBM-shares - 31 Dec 2018 | $1,895,000 | $1,770,000 | ($125,000) |
Moving from a negative $200,000 Jan-1 to a negative $125,000 requires a reduction of $75,000
| Fair value Adjustment | |
| Balance needed in fair value adj. | ($75,000) |
| Existing balance in fair value adj. | ($200,000) |
| Increase (decrease) needed in fair value adj. | ($125,000) |
Fair value adjustment = ($1,770,000 - $1,695,000) = $125,000
(3)
| Available for sale securities | Cost | Fair value | Accumulated Unrealized gain(loss) |
| IBM-shares - 31 Dec 2018 | $1,895,000 | $1,920,000 | $25,000 |
Moving from a negative $200,000 Jan-1 to a positive $25,000 requires a reduction of $225,000
| Fair value Adjustment | |
| Balance needed in fair value adj. | $25,000 |
| Existing balance in fair value adj. | ($200,000) |
| Increase (decrease) needed in fair value adj. | ($225,000) |
Fair value adjustment = ($1,920,000 - $1,695,000) = $225,000
ekkarill92 answered 8 months agoRelated Solutions
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The accounting records of Wall’s China Shop reflected the
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Required
a. Determine the amount of retained earnings as
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b. After looking at the amount of retained
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The accounting records of Wall’s China Shop reflected the following balances as of January 1, 2018:...
The accounting records of Wall’s China Shop reflected the
following balances as of January 1, 2018: Cash $ 17,600 Beginning
inventory 18,200 (200 units @ $91) Common stock 15,400 Retained
earnings 20,400 The following five transactions occurred in 2018:
First purchase (cash) 120 units @ $93 Second purchase (cash) 200
units @ $101 Sales (all cash) 350 units @ $199 Paid $16,950 cash
for salaries expense Paid cash for income tax at the rate of 25
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