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Problem 17-06 Tamarisk Company has the following portfolio of investment securities at September 30, 2020, its...

Problem 17-06

Tamarisk Company has the following portfolio of investment securities at September 30, 2020, its most recent reporting date.

Investment Securities

Cost

Fair Value
Horton, Inc. common (5,120 shares) $220,160 $203,890
Monty, Inc. preferred (3,590 shares) 140,010 146,770
Oakwood Corp. common (960 shares) 173,760 172,690


On October 10, 2020, the Horton shares were sold at a price of $54 per share. In addition, 3,040 shares of Patriot common stock were acquired at $56 per share on November 2, 2020. The December 31, 2020, fair values were Monty $114,890, Patriot $139,880, and Oakwood $186,000.

Prepare the journal entries to record the sale, purchase, and adjusting entries related to the equity securities in the last quarter of 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date

Account Titles and Explanation

Debit

Credit

Oct. 10, 2020Nov. 2, 2020Dec. 31, 2020

Oct. 10, 2020Nov. 2, 2020Dec. 31, 2020

Oct. 10, 2020Nov. 2, 2020Dec. 31, 2020

Solutions

Expert Solution

Cost

​Fair Value

FV Adjustment

Horton Inc

220160

203890

$ (16270)

Monty Inc

140010

146770

$ (6760)

Oakwood Inc

173760

172690

$ 1070

Total

$ (21960)

It is assumed there was no previous balance in the fair value adjustments account and fair values are of last quarter, thus there should be a credit balance of $21960 in the fair value adjustment account as on September 30

Cost

​Fair Value

FV Adjustment

Horton Inc

0

0

0

Monty Inc

140010

114890

$(25120)

Oakwood Inc

173760

186000

$12240

Patriot Inc

170240

139880

$ (30360)

$ (43240)

Previous Balance

$ (21960)

Adjustment needed

$ 21280

Journal Entries

10.10.2017

Cash

$ 276480

Investment in stock

$ 220160

Gain on sale

$ 56320

(To record sale of shares)

11.02.2017

Investment in Patriot Stock

$ 170240

Cash

$ 170240

(To record acquisition of shares)

12.31.2017

Unrealized Holding G/L

$ 21280

Fair Value Adjustment

$ 21280

(To record Fair value adjustment)

ekkarill92 answered 1 year ago
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