In: Accounting
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?
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 |