Question
In: Accounting
Tamarisk Company has the following securities in its portfolio on December 31, 2017. None of these...
Tamarisk Company has the following securities in its portfolio
on December 31, 2017. None of these investments are accounted for
under the equity method.
|
Investments |
Cost |
Fair Value |
||
| 1,500 shares of Gordon, Inc., Common | $77,600 | $73,200 | ||
| 5,000 shares of Wallace Corp., Common | 172,900 | 167,700 | ||
| 400 shares of Martin, Inc., Preferred | 63,500 | 65,100 | ||
| $314,000 | $306,000 |
All of the securities were purchased in 2017.
In 2018, Tamarisk completed the following securities
transactions.
| March 1 | Sold the 1,500 shares of Gordon, Inc., Common, @ $45 less fees of $1,200. | |
| April 1 | Bought 700 shares of Earnhart Corp., Common, @ $75 plus fees of $1,300. |
Tamarisk’s portfolio of equity securities appeared as follows on
December 31, 2018.
|
Investments |
Cost |
Fair Value |
||
| 5,000 shares of Wallace Corp., Common | $172,900 | $167,700 | ||
| 700 shares of Earnhart Corp., Common | 53,800 | 50,100 | ||
| 400 shares of Martin, Inc., Preferred | 63,500 | 61,700 | ||
| $290,200 | $279,500 |
Prepare the general journal entries for Tamarisk Company
for:
| (a) | The 2017 adjusting entry. | |
| (b) | The sale of the Gordon stock. | |
| (c) | The purchase of the Earnhart stock. | |
| (d) | The 2018 adjusting entry for the trading portfolio. |
Solutions
Expert Solution
Journal Entries :
| Req. | Date | Accounts Titles and explanations | Debit $ | Credit $ |
| a | Dec 31 2017 | Unrealised loss on revaluation to FV | 9600 | |
| Investments for sale | 9600 | |||
| (being revaluation of Gordon equity 77600-73200=4400 & Wallace 172900 - 167700=5200) | ||||
| Dec 31 2017 | Investment for sale | 1600 | ||
| Unrealised gain on revaluation to FV | 1600 | |||
| (being revaluation of Martin equity 63500-65100=1600) | ||||
| b | March 1 2018 | Cash | 66300 | |
| Loss on sale of Investment | 6900 | |||
| Investment for Sale | 73200 | |||
| (being sale of Gordon 1500 shares and loss booked) | ||||
| March 1 2018 | Loss on Sale of Investment | 4400 | ||
| Unrealised loss on revaluation to FV | 4400 | |||
| (being the unrealised loss got realised on Gordon) | ||||
| c | Apr 1 2018 | Investment for Sale | 51200 | |
| Cash | 51200 | |||
| (being purchase of Earnhart equity 700*75-1300 ) | ||||
| d | Dec 31 2018 | Unrealised loss on revaluation to FV | 8900 | |
| Investment | 8900 | |||
| (being revaluation of Wallace equity 172900-167700=5200, Earnhart 53800-50100=3700 ) | ||||
| Dec 31 2018 | Unrealised loss on revaluation to FV | 200 | ||
| Unrealised gain on revaluation to FV | 1600 | |||
| Investment for Sale | 1800 | |||
| (being revaluation of Martin equity 63500-61700=1800) |
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