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Farms inc. owns 4% of common shares of XYZ. co. at the beginning of the current...
Farms inc. owns 4% of common shares of XYZ. co. at the beginning of the current year the fair value of an investment in XYZ was $250,000. At the end of the year, the fair value had decreased to $245,000.
What journal entry would Farms inc. record to adjust the investment of the fair value?
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Expert Solution
| Notes: 1 | Calculation of Gain or Loss on Investment | ||
| Market Value at the year End | $ 2,45,000 | ||
| Less: Investment value | $ 2,50,000 | ||
| Unrealized Loss on investment | $ -5,000 | ||
| Solution: | |||
| Journal entry of the same is passed as below, | |||
| Date | Account Title and explanation | Debit | Credit |
| ----- | Unrealized Loss on investment | $ 5,000 | |
| Investment | $ 5,000 | ||
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