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Required information Skip to question [The following information applies to the questions displayed below.] Stoll Co.'s...

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[The following information applies to the questions displayed below.]

Stoll Co.'s long-term available-for-sale portfolio at the start of this year consists of the following.

Available-for-Sale Securities Cost Fair Value
Company A bonds $ 533,600 $ 490,000
Company B notes 159,230 152,000
Company C bonds 662,000 640,190


Stoll enters into the following transactions involving its available-for-sale debt securities this year.

Jan. 29 Sold one-half of the Company B notes for $78,640.
July 6 Purchased bonds of Company X for $126,900.
Nov. 13 Purchased notes of Company Z for $267,900.
Dec. 9 Sold all of the bonds of Company A for $521,600.


The fair values at December 31 are B, $83,900; C, $605,200; X, $107,000; and Z, $275,000.

Required:
1. Prepare journal entries to record these transactions, including the December 31 adjusting entry to record the fair value adjustment for the long-term investments in available-for-sale securities.
2. Determine the amount Stoll reports on its December 31 balance sheet for its long-term investments in available-for-sale securities.

Solutions

Expert Solution

Answer
Journal Entry
1)
Date Account title and explanation Debit Credit
Jan-29 Cash $        78,640
Loss on sale of bond $             975
Investment in bond B (159230/2) $        79,615
July C Investment in Bond X $     1,26,900
Cash $     1,26,900
Nov B Investment in Bond Z $     2,67,900
Cash $     2,67,900
Dec-09 Cash $     5,21,600
Loss on sale of bond $        12,000
Investment in Bond A $     5,33,600
Dec-31 Investment in bond B $          4,285
Unrealized gain (83900-79615) $          4,285
Dec-31 Unrealized loss (662000-605200) $        56,800
Investment in Bond C $        56,800
Dec-31 Unrealized loss (126900-107000) $        19,900
Inveestment in bond X $        19,900
Dec-31 Investment in Bond Z $          7,100
Unrealized gain (275000-267900) $          7,100
2)
Amount in Stoll report in Dec 31 Balance Sheet
= 83900+605200+107000+275000
= $10,71,100

ekkarill92 answered 1 year ago
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