Question

Carlsville Company began operations in the current year and had no prior stock investments. The following transactions are from its short-term stock investments with insignificant influence. Prepare journal entries to record these transactions. On December 31, prepare the adjusting entry to record the fair value adjustment for the portfolio of stock investments.

July		22		Purchased 1,300 shares of Hunt Corp. at $29 per share.
Sept.		5		Received a $2 cash dividend for each share of Hunt Corp.
Sept.		27		Purchased 3,400 shares of HCA at $20 per share.
Oct.		3		Sold 1,300 shares of Hunt at $24 per share.
Oct.		30		Purchased 1,200 shares of Black & Decker at $52 per share.
Dec.		17		Received a $3 cash dividend for each share of Black & Decker.
Dec.		31		Fair value of the short-term stock investments is $135,000.

Prepare journal entries for the following:

a. Purchased 1,300 shares of Hunt Corp. at $29 per share.

b. Received a $2 cash dividend for each share of Hunt Corp.

c. Purchased 3,400 shares of HCA at $20 per share.

d. Sold 1,300 shares of Hunt at $24 per share.

e. Purchased 1,200 shares of Black & Decker at $52 per share.

f. Received a $3 cash dividend for each share of Black & Decker.

g. Fair value of the short-term stock investments in $135,000. Record the year-end adjustment to fair value, if any.

Answer 1

Answer
Date	Journal entry	Debit	Credit
Jul-22	Investment in Hunt Corp (1300*29)	$37,700
	Cash		$37,700
	(To record purchase of shares of Hunt Corp)
Sep-05	Cash (1300*2)	$ 2,600
	Dividend Income		$ 2,600
	(To record cash dividend for each share of Hunt Corp)
Sep-27	Investment in HCA (3400*20)	$68,000
	Cash		$68,000
	(To record purchase of shares of HCA)
Oct-03	Cash (1300 *24)	$31,200
	Loss on investment	$ 6,500
	Investment in Hunt Corp (1300*29)		$37,700
	(To record sale of shares of Hunt Corp)
Oct-30	Investment in Black & Decker (1200*52)	$62,400
	Cash		$62,400
	(To record purchase of shares of Black & Decker)
Dec-17	Cash (1200*3)	$ 3,600
	Dividend Income		$ 3,600
	(To record cash dividend for each share of Black & Decker)
Dec-31	Fair value adjustment (135000-130400)	$ 4,600
	Unrealized gain		$ 4,600
	(To record adjusting entry for Fair value adjustment)
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