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)

ekkarill92 answered 1 year ago
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