Question

In: Accounting

Johnson Inc.’s non-strategic investment portfolio at December 31, 2019, consisted of the following: Debt and Equity...

Johnson Inc.’s non-strategic investment portfolio at December 31, 2019, consisted of the following:

Debt and Equity Investments* Cost Fair Value
10,200 Xavier Corp. common shares $ 166,770 $ 147,900
1,350 Young Inc. common shares 70,200 66,960
122,000 Zed Corp. common shares 40,600 36,200

*The fair value adjustments were recorded on December 31, 2019.

Johnson had no other debt and equity investments at December 31, 2019, other than those shown above. During 2020, Johnson engaged in the following transactions:

2020
Jan. 17 Sold 850 common shares of Young Inc. for $40,800. Johnson Inc. planned to hold these shares for less than one year.
Mar. 3 Purchased 5,200 common shares of Allen Corp. for $312,000. The shares represent a 30% ownership in Allen Corp.
June 7 Received dividends from Allen Corp. at the rate of $2.70 per share.
Aug. 14 Sold the remaining Young Inc. shares at $31.70.
Nov. 28 Purchased a 5% ownership in Davis Corp. by acquiring 10,200 common shares at a total of $90,780. Johnson Inc. will sell these shares in six to nine months.
Dec. 30 Sold 10,200 shares of Xavier Corporation for $163,200.
Dec. 31 Allen Corp. announced a net profit of $281,000 for the year.


Required:
Journalize the above transactions.



Analysis Component:
Assume the Allen Corp. shares were sold on January 16, 2021, for $366,000. Calculate the investment income or loss and select whether it is unrealized/realized?

Solutions

Expert Solution

Date General Ledger Debit Credit
17-Jan-20 Cash $   40,800
Loss on sale of Investment $     1,360
     Short-term Investment - Young Shares (66960/1350*850) $   42,160
3-Mar Equity Investment in Allen Corp $ 312,000
     Cash $ 312,000
7-Jun Cash $   14,040
     Equity Investment in Allen Corp (5200*2.7) $   14,040
14-Aug Cash ((1350-850)*31.7) $   15,850
Loss on sale of Investment $     8,950
     Short-term Investment - Young Shares (66960/1350*500) $   24,800
28-Nov Short-term Investment - Devis Corp $   90,780
     Cash $   90,780
30-Dec Cash ((1350-850)*31.7) $ 163,200
     Gain on sale of Investment $   15,300
     Short-term Investment - Xavier Corp $ 147,900
31-Dec Equity Investment in Allen Corp $   84,300
     Equity Investment Earnings Allen Corp (281000*30%) $   84,300
Investment loss - Allen Corp. Realized Loss $   16,260
(312000-14040+84300)-366000

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