In: Accounting
Flint Company has the following securities in its portfolio on
December 31, 2020. None of these investments are accounted for
under the equity method.
Investments |
Cost |
Fair Value |
||
1,500 shares of Gordon, Inc., Common | $72,500 | $68,500 | ||
5,000 shares of Wallace Corp., Common | 176,300 | 171,700 | ||
400 shares of Martin, Inc., Preferred | 63,300 | 64,800 | ||
$312,100 | $305,000 |
All of the securities were purchased in 2020.
In 2021, Flint 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. |
Flint’s portfolio of equity securities appeared as follows on
December 31, 2021.
Investments |
Cost |
Fair Value |
||
5,000 shares of Wallace Corp., Common | $176,300 | $171,700 | ||
700 shares of Earnhart Corp., Common | 53,800 | 50,100 | ||
400 shares of Martin, Inc., Preferred | 63,300 | 61,300 | ||
$293,400 | $283,100 |
Prepare the general journal entries for Flint Company
for:
(a) | The 2020 adjusting entry. | |
(b) | The sale of the Gordon stock. | |
(c) | The purchase of the Earnhart stock. | |
(d) | The 2021 adjusting entry for the trading portfolio. |
(Credit account titles are automatically indented when
amount is entered. Do not indent manually. If no entry is required,
select "No Entry" for the account titles and enter 0 for the
amounts.)
No. |
Account Titles and Explanation |
Debit |
Credit |
(a) |
|||
(b) |
|||
(c) |
|||
(d) |
|||
Answer | |||
Journal Entry | |||
No. | Particulars | Debit | Credit |
a | Unrealized Holding Loss or Gain (312,100-305,000) | $ 7,100 | |
To, Fair Value Adjustment | $ 7,100 | ||
( To record fair value adjustment) | |||
b | Cash (1500*45)-1200 | $ 66,300 | |
Loss on Sale of Stock | $ 10,000 | ||
To, Equity Investment | $ 76,300 | ||
(To record securities sold) | |||
c | Equity Investment (700*75)+1300 | $ 51,200 | |
To, Cash | $ 51,200 | ||
(To record securities purchased) | |||
d | Unrealized Holding Loss or Gain | $ 3,200 | |
To, Fair Value Adjustment | $ 3,200 | ||
( To record fair value adjustment) |
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