Question

Stoll Co.’s long-term available-for-sale portfolio at December 31, 2016, consists of the following.

Available-for-Sale Securities	Cost			Fair Value
80,000 shares of Company A common stock	$	1,070,600		$	980,000
14,000 shares of Company B common stock		318,750			308,000
35,000 shares of Company C common stock		1,325,500			1,281,875

Stoll enters into the following long-term investment transactions during year 2017.

Jan.		29		Sold 7,000 shares of Company B common stock for $158,375 less a brokerage fee of $3,100.
Apr.		17		Purchased 20,000 shares of Company W common stock for $395,000 plus a brokerage fee of $3,500. The shares represent a 30% ownership in Company W.
July		6		Purchased 9,000 shares of Company X common stock for $253,125 plus a brokerage fee of $3,500. The shares represent a 10% ownership in Company X.
Aug.		22		Purchased 100,000 shares of Company Y common stock for $750,000 plus a brokerage fee of $8,200. The shares represent a 51% ownership in Company Y.
Nov.		13		Purchased 17,000 shares of Company Z common stock for $533,800 plus a brokerage fee of $6,900. The shares represent a 5% ownership in Company Z.
Dec.		9		Sold 80,000 shares of Company A common stock for $1,030,000 less a brokerage fee of $4,100.

The fair values of its investments at December 31, 2017, are: B, $162,750; C, $1,220,625; W, $382,500; X, $236,250; Y, $1,062,500; and Z, 557,600.

Required:
1. Determine the amount Stoll should report on its December 31, 2017, balance sheet for its long-term investments in available-for-sale securities.
2. Prepare any necessary December 31, 2017, adjusting entry to record the fair value adjustment for the long-term investments in available-for-sale securities.

Prepare any necessary December 31, 2017, adjusting entry to record the fair value adjustment for the long-term investments in available-for-sale securities.

	Fair Value Adjustment Computation - Available-for-Sale Securities December 31, 2017 AFS Securities # of shares Cost Fair Value Unrealized Amount Total $0 $0

Record the year-end adjusting entry for the securities portfolio as of December 31, 2017.

Note: Enter debits before credits.

	Date General Journal Debit Credit Dec 31

3. What amount of gains or losses on transactions relating to long-term investments in available-for-sale securities should Stoll report on its December 31, 2017, income statement?

Answer 1

Answer 1.
Dec 31, 2016	No. of Shares	Cost	Fair Value	Difference
Company A	80,000	1,070,600.00	980,000.00	(90,600.00)
Company B	14,000	318,750.00	308,000.00	(10,750.00)
Company C	35,000	1,325,500.00	1,281,875.00	(43,625.00)
Total		2,714,850.00	2,569,875.00	(144,975.00)
Dec 31, 2017	No. of Shares	Cost	Fair Value	Difference
Company B	7,000	159,375.00	162,750.00	3,375.00
Company C	35,000	1,325,500.00	1,220,625.00	(104,875.00)
Company X	9,000	256,625.00	236,250.00	(20,375.00)
Company Z	17,000	540,700.00	557,600.00	16,900.00
Total		1,484,875.00	1,383,375.00	(101,500.00)
Less - 2016 Unrealises Loss				(144,975.00)
Net Unrealized Gain				43,475.00

Answer 2.
Journal Entry
Date	Particulars	Dr. Amt.	Cr. Amt.
31-Dec-17	Fair Value Adjustment (AFS - Long Term)	43,475.00
	Unrealized Loss Equity		43,475.00

Answer 3.
Company B
Sale of 7,000 Shares	155,275
Cost of 7,000 Shares - $318,750 X (7,000/14000)	159,375
Gain (Loss) on sale of Shares		(4,100.00)
Company A
Sale of 80,000 Shares	1,025,900
Cost of 80,000 Shares	1,070,600
Gain (Loss) on sale of Shares		(44,700.00)
Total Gain(Loss) on sale of shares		(48,800.00)