Question

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Record the journal entries to be made by Fox Inc. for the following marketable security transactions based on the information in the exhibit.

To prepare each required journal entry:

• Click on a cell in the Account Name column and select the appropriate account. An account may be used once or not at all for a journal entry.
• Enter the corresponding debit or credit amount in the associated column.
• All amounts will be automatically rounded to the nearest dollar.
• Not all rows in the table might be needed to complete each journal entry.

The following information pertains to Fox Inc.’s portfolio of marketable securities for the year ended December 31, Year 1, and December 31, Year 2:

	Cost	Fair Value at 12/31/ Year 1	Year 2 Activity: Purchases	Year 2 Activity: Sales	Fair Value at 12/31/ Year 2
Marketable Equity Securities
Smith Co.	$230,000	$240,000			$235,000
Jones Co.	$290,000	$275,000			$285,000
Williams Co.	$270,000	$245,000		$255,000	N/A
Gores Co.	$250,000	$235,000			$265,000
Held-to-Maturity Debt Securities
Martin Co.			$1,400,000		$1,250,000

Note 1: Fox Inc. uses U.S. GAAP.
Note 2: Fox Inc. uses valuation accounts to record changes in the fair value of its marketable securities, and an allowance account for any applicable credit losses.
Note 3: The Martin Co. security was purchased at par value.
Note 4: The decline in the value of Martin Company security is the result of current expected credit losses, with the present value of future principal and interest payment collections equal to fair value at the end of Year 2.

Year 1 Journal Entries:

1. Mark-to-market journal entry for the Smith Co. security at 12/31/Year 1:

2. Mark-to-market journal entry for the Jones Co. security at 12/31/Year 1:

3. Mark-to-market journal entry for the Williams Co. security at 12/31/Year 1:

4. Mark-to-market journal entry for the Gores Co. security at 12/31/Year 1:

Year 2 Journal Entries:

5. Mark-to-market journal entry for the Smith Co. security at 12/31/Year 2:

6. Mark-to-market journal entry for the Jones Co. security at 12/31/Year 2:

7. Journal entry to record the sale of the Williams Co. security on 7/1/Year 2:

8. Mark-to-market journal entry for the Gores Co. security at 12/31/Year 2:

9. Journal entry to record purchase of the Martin Co. investment:

10. Journal entry to record the impairment of the Martin Co. investment:

ONLY USE THE FOLLOWING

Allowance for credit losses

Cash

Credit loss

Equity securities, Gores Co.

Equity securities, Jones Co.

Equity securities, Smith Co.

Equity securities, Williams Co

.Held-to-maturity debt securities, Martin Co.

Realized gain on equity securities

Realized loss on equity securities

Unrealized gain on equity securities

Unrealized loss on equity securities

Valuation account, Gores Co.

Valuation account, Jones Co.

Valuation account, Smith Co.

Valuation account, Williams Co.

Answer 1

Answer:

No.	Date	Account title and explanation	Debit	Credit
	Year-1
1	12/31.	Valuation account, Smith Co.	$          10,000
		Unrealized gain on equity securities		$        10,000
2	12/31.	Unrealized loss on equity securities	15,000
		Valuation account, Jones Co.		15,000
3	12/31.	Unrealized loss on equity securities	25,000
		Valuation account, Williams Co.		25,000
4	12/31.	Unrealized loss on equity securities	15,000
		Valuation account, Gores Co.		15,000
	Year-2
5	12/31.	Unrealized loss on equity securities	5,000
		Valuation account, Smith Co.		5,000
6	12/31.	Valuation account, Jones Co.	10,000
		Unrealized gain on equity securities		10,000
7	7/1.	Cash	255,000
		Realized loss on equity securities	15,000
		Valuation account, Williams Co.	25,000
		Equity securities, Williams Co.		270,000
		Unrealized loss on equity securities		25,000
8	12/31.	Valuation account, Gores Co.	30,000
		Unrealized gain on equity securities		30,000
9		Held-to-maturity debt securities, Martin Co.	1,400,000
		Cash		1,400,000
10		Credit loss	150,000
		Allowances for credit loss		150,000