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.

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Expert Solution

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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 10 months ago

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