Question

In: Accounting

Storm, Inc. purchased the following available-for-sale securities during Year 1, its first year of operations: Name...

Storm, Inc. purchased the following available-for-sale securities during Year 1, its first year of operations:

Name Number of Shares Cost
Dust Devil, Inc. 1,900 $81,700
Gale Co. 860 69,660
Whirlwind Co. 2,840 110,760
Total $262,120

The market price per share for the available-for-sale security portfolio on December 31, Year 1, was as follows:

Market Price per Share,

Dec. 31, Year 1
Dust Devil, Inc. $39
Gale Co. 75
Whirlwind Co. 42

Required:

A. Provide the journal entry to adjust the available-for-sale security portfolio to fair value on December 31, Year 1. Refer to the Chart of Accounts for exact wording of account titles.
B. Describe the income statement impact from the December 31, Year 1, journal entry.

Solutions

Expert Solution

Thank you for your patience. Please give positive ratings so I can keep answering. It would help me a lot. Please comment if you have any query. Thanks!
Storm, Inc.
Name Number Cost Market Price Market Value Increase/(decrease)
Dust Devil, Inc. 1,900.00      81,700.00        39.00      74,100.00 (7,600.00)
Gale Co.     860.00      69,660.00        75.00      64,500.00 (5,160.00)
Whirlwind Co. 2,840.00 110,760.00        42.00 119,280.00     8,520.00
262,120.00 257,880.00 (4,240.00)
Answer a
Journal Entry
Account Debit $ Credit $
Loss on available-for-sale securities (recorded in other comprehensive income) 7,600.00
Dust Devil, Inc.        7,600.00
Loss on available-for-sale securities (recorded in other comprehensive income) 5,160.00
Gale Co.        5,160.00
Whirlwind Co. 8,520.00
Gain on available-for-sale securities (recorded in other comprehensive income)        8,520.00
Answer b
Net loss of $ 4,240 will be recorded as other comprehensive income in the income statement and will be shown in Balance Sheet.

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Hurricane Inc. purchased a portfolio of available-for-sale securities in 2016, its first year of operations. The...
Hurricane Inc. purchased a portfolio of available-for-sale securities in 2016, its first year of operations. The cost and fair value of this portfolio on December 31, 2016, was as follows: 1 Name Number of Shares Total Cost Total Fair Value 2 Tornado Inc. 830.00 $14,857.00 $16,185.00 3 Tsunami Corp. 1,230.00 31,488.00 34,809.00 4 Typhoon Corp. 2,170.00 44,268.00 43,834.00 5 Total $90,613.00 $94,828.00 On June 12, 2017, Hurricane purchased 1,400 shares of Rogue Wave Inc. at $50 per share plus a...
Hurricane Inc. purchased a portfolio of available-for-sale securities in 2016, its first year of operations. The...
Hurricane Inc. purchased a portfolio of available-for-sale securities in 2016, its first year of operations. The cost and fair value of this portfolio on December 31, 2016, was as follows: 1 Name Number of Shares Total Cost Total Fair Value 2 Tornado Inc. 760.00 $12,920.00 $14,820.00 3 Tsunami Corp. 1,220.00 30,988.00 34,648.00 4 Typhoon Corp. 2,170.00 44,051.00 43,400.00 5 Total $87,959.00 $92,868.00 On June 12, 2017, Hurricane purchased 1,440 shares of Rogue Wave Inc. at $48 per share plus a...
During 2019, its first year of operations, A Company purchased 4 available-for-sale investments as follows: Security...
During 2019, its first year of operations, A Company purchased 4 available-for-sale investments as follows: Security Shares Purchased Total Cost Co 1 3500 $67000 Co 2 2215   $72620 Co 3 1000 $21550 Co 4 2250    $58000 Assume that as of November 30, 2019, the Co 1 stock had a market value of $23 per share, Co 2. stock had a market value of $23 per share, Co 3 stock had a market value of $38 per share and Co...
. During the first year of operations, Makala Company purchased two available-for-sale investments as follows: Security...
. During the first year of operations, Makala Company purchased two available-for-sale investments as follows: Security Shares Purchased Cost Oceanna Company 700 $29,000 Rockledge, Inc. 1,900 41,000 Assume that as of December 31, Oceanna Company’s stock had a market value of $49 per share and Rockledge, Inc.’s stock had a market value of $20 per share. Makala had 10,000 shares of no par stock outstanding that was issued for $150,000. For the year ending December 31, Makala had a net...
Balance Sheet Presentation of Available-for-Sale Investments During Year 1, its first year of operations, Galileo Company...
Balance Sheet Presentation of Available-for-Sale Investments During Year 1, its first year of operations, Galileo Company purchased two available-for-sale investments as follows: Security Shares Purchased Cost Hawking Inc. 850 $42,925 Pavlov Co. 2,300 60,490 Assume that as of December 31, Year 1, the Hawking Inc. stock had a market value of $60 per share and the Pavlov Co. stock had a market value of $47 per share. Galileo Company had net income of $332,000 and paid no dividends for the...
Fair Value Journal Entries, Available-for-Sale Investments Hurricane Inc. purchased a portfolio of available-for-sale securities in Year...
Fair Value Journal Entries, Available-for-Sale Investments Hurricane Inc. purchased a portfolio of available-for-sale securities in Year 1, its first year of operations. The cost and fair value of this portfolio on December 31, Year 1, was as follows: Name Number of Shares Total Cost Total Fair Value Tornado Inc. 1,300 $17,420 $19,340 Tsunami Corp. 700 22,960 25,030 Typhoon Corp. 250 7,500 7,130 Total $47,880 $51,500 On June 12, Year 2, Hurricane purchased 550 shares of Rogue Wave Inc. at $30...
15-3.6 Balance Sheet Presentation of Available-for-Sale Investments During Year 1, its first year of operations, Galileo...
15-3.6 Balance Sheet Presentation of Available-for-Sale Investments During Year 1, its first year of operations, Galileo Company purchased two available-for-sale investments as follows: Security Shares Purchased Cost Hawking Inc. 910 $48,776 Pavlov Co. 2,470 68,913 Assume that as of December 31, Year 1, the Hawking Inc. stock had a market value of $64 per share and the Pavlov Co. stock had a market value of $50 per share. Galileo Company had net income of $377,800 and paid no dividends for...
Mead Inc. began operations in Year 1, following is a series of transactions and events involving its long-term debt investments in available-for-sale securities.
  Mead Inc. began operations in Year 1, following is a series of transactions and events involving its long-term debt investments in available-for-sale securities. Year 1 Jan.   20   Purchased Johnson & Johnson bonds for $29,500. Feb.   9   Purchased notes of Sony for $63,540. June   12   Purchased bonds of Mattel for $49,500. Dec.   31   Fair values for debt in the portfolio are Johnson & Johnson, $32,300; Sony, $55,750; and Mattel, $57,850. Year 2...
Mead Inc. began operations in Year 1, following is a series of transactions and events involving its long-term debt investments in available-for-sale securities.
  Mead Inc. began operations in Year 1, following is a series of transactions and events involving its long-term debt investments in available-for-sale securities.Year 1 Jan.   20   Purchased Johnson & Johnson bonds for $26,000. Feb.   9   Purchased notes of Sony for $60,390. June   12   Purchased bonds of Mattel for $46,000. Dec.   31   Fair values for debt in the portfolio are Johnson & Johnson, $30,100; Sony, $49,650; and Mattel, $54,850. Year 2 Apr....
Garcia Co. has the following available-for-sale securities outstanding on December 31, 2016 (its first year of...
Garcia Co. has the following available-for-sale securities outstanding on December 31, 2016 (its first year of operations). Cost Fair Value Rossi Corp. Stock $20,000 $19,000 Barker Company Stock 9,500 8,800 Boliva Company Stock 20,000 20,600 $49,500 $48,400 During 2017, Barker Company stock was sold for $9,200, the difference between the $9,200 and the “fair value” of $8,800 being recorded as a “Gain on Sale of Investments.” The market price of the stock on December 31, 2017, was: Rossi Corp. stock...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT