Question

2018

Apr.		15		Sold 1,000 shares of Johnson & Johnson at $23.50 per share less a $525 commission.
July		5		Sold 1,500 shares of Mattel at $23.90 per share less a $235 commission.
July		22		Purchased 600 shares of Sara Lee at $22.50 per share plus a $480 commission.
Aug.		19		Purchased 900 shares of Eastman Kodak at $17 per share plus a $198 commission.
Dec.		31		Per share fair values for stocks in the portfolio are: Kodak, $19.25; Sara Lee, $20.00; and Sony, $35.00.

2019

Feb.		27		Purchased 2,400 shares of Microsoft at $67.00 per share plus a $525 commission.
June		21		Sold 1,200 shares of Sony at $48.00 per share less an $880 commission.
June		30		Purchased 1,400 shares of Black & Decker at $36.00 per share plus a $435 commission.
Aug.		3		Sold 600 shares of Sara Lee at $16.25 per share less a $435 commission.
Nov.		1		Sold 900 shares of Eastman Kodak at $22.75 per share less a $625 commission.
Dec.		31		Per share fair values for stocks in the portfolio are: Black & Decker, $39.00; and Microsoft, $69.00.

Required:
1. Prepare journal entries to record these transactions and events and any year-end fair value adjustments to the portfolio of long-term available-for-sale securities. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round your intermediate calculations.)

********Word Choices for Journal Entry************

• No journal entry required
• Accounts receivable
• Cash
• Dividend revenue
• Earnings from investment
• Earnings from long-term investment
• Fair value adjustment—AFS (LT)
• Fair value adjustment—Available-for-sale (ST)
• Fair value adjustment—Trading
• Foreign exchange gain
• Foreign exchange loss
• Gain on sale of investments
• Interest receivable
• Interest revenue
• Long-term investments—AFS (Black & Decker)
• Long-term investments—AFS (Eastman Kodak)
• Long-term investments—AFS (J&J)
• Long-term investments—AFS (Mattel)
• Long-term investments—AFS (Microsoft)
• Long-term investments—AFS (Sara Lee)
• Long-term investments—AFS (Sony)
• Loss on sale of investments
• Sales
• Short-term investments—AFS (Black & Decker)
• Short-term investments—AFS (Eastman Kodak)
• Short-term investments—AFS (J&J)
• Short-term investments—AFS (Mattel)
• Short-term investments—AFS (Microsoft)
• Short-term investments—AFS (Sara Lee)
• Short-term investments—AFS (Sony)
• Unrealized gain—Equity
• Unrealized gain—Income
• Unrealized loss—Equity
• Unrealized loss—Income

Answer 1

SOLUTION:

2018		Debit	Credit
Jan-20	Longterm investments—AFS (J&J	20,740
	Cash		20,740
Feb-09	Longterm investments—AFS (Sony)	55,665
	Cash		55,665
Jun-12	Longterm investments—AFS (Mattel)	40,695
	Cash		40,695
Dec-31	Unrealized loss—Equity	3,650
	Fair value adjustment—AFS (LT)		3,650
Apr-15	Cash	22,975
	Gain on sale of investments		2,235
	Longterm investments—AFS (J&J)		20,740
Jul-05	Cash	35,615
	Loss on sale of investments	5,080
	Longterm investments—AFS (Mattel)		40,695
Jul-22	Longterm investments—AFS (Sara Lee)	13,980
	Cash		13,980
Aug-19	Longterm investments—AFS (Eastman Kodak)	15,498
	Cash		15,498
Dec-31	Unrealized loss—Equity	10,168
	Fair value adjustment—AFS (LT)		10,168
2019
Feb-27	Longterm investments—AFS (Microsoft)	161,325
	Cash		161,325
Jun-21	Cash	56,720
	Gain on sale of investments		1,055
	Longterm investments—AFS (Sony)		55,665
Jun-30	Longterm investments—AFS (Black & Decker)	50,835
	Cash		50,835
Aug-03	Cash	9,315
	Loss on sale of investments	4,665
	Longterm investments—AFS (Sara Lee)		13,980
Nov-01	Cash	19,850
	Gain on sale of investments		4,352
	Longterm investments—AFS (Eastman Kodak)		15,498
Dec-31	Fair value adjustment—AFS (LT)	21,858
	Unrealized loss—Equity		13,818
	Unrealized gain—Equity		8,040

　

Working:

Jan. 20, 2018 {(1000 * $20.50) + $240} = $20,740

Feb. 9, 2018 {(1,200 * $46.20) + $225} = $55,665

June 12, 2018 {(1,500 * $27.00) + $195} = $40,695

Dec. 31, 2018

	Cost	Fair value
J & J	20,740	21,500
Sony	55,665	45,600
Mattel	40,695	46,350
	117,100	113,450

J & J: $21,500 (=1000 * $21.50)

Sony: $45,600 (=1,200 * $38.00)

Mattel: $46,350 (=1,500 * $30.90)

Fair Adjustment: {$117,100 - $113,450} = $3,650

　

Apr. 15, 2019 {(1,000 * $23.50) - $525} = $22,975

July 5, 2019 {(1,500 * $23.90) - $235} = $35,615

July 22, 2019 {(600 * $22.50) + $480} = $13,980

Aug. 19, 2019 {(900 * $17.00) + $198} = $15,498

Dec. 31, 2019

	Cost	Fair value
J & J	15,498	17,325
Sony	13,980	12,000
Mattel	55,665	42,000
	85,143	71,325

　

Kodak: 900 * $19.25 = $17,325

Sara Lee: 600 * $20.00 = $12,000

Sony: 1,200 * $35.00 = $42,000

$85,143 - $71,325 = $13,818