Question

In: Accounting

Flint Company has the following securities in its portfolio on December 31, 2020. None of these...

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)

Solutions

Expert Solution

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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