Question

7.         Hadley Company has the following securities in its portfolio on December 31, 2020:

                                                                           Cost             Fair Value

15,000 shares of Brady Corp. Common         $450,000         $460,000

100 shares of Sanders, Inc. Common             115,000             90,000

2,000 shares of Peters, Inc. Preferred             210,000         195,000

                                                                        $775,000         $745,000

All of the securities were purchased in 2020. In 2021, Hadley completed the following

securities transactions:

March 1           Sold 5,000 shares of Brady, Corp. Common for $170,000

August 1          Bought 1,000 shares of North Stores, Common @ $40 each plus fees of $1,000.

The Hadley Company portfolio of securities appeared as follows on December 31, 2021:

                                                                           Cost             Fair Value

10,000 shares of Brady Corp., Common        $300,000         $280,000

100 Sanders Convertible Bonds                     115,000         102,000

1.000 shares North Stores Common                   41,000             42,000

2,000 shares of Peters, Inc. Preferred             210,000         220,000

                                                                        $666,000         $644,000

On the form provided prepare the general journal entries for Hadley Company for:

(a)        the 2020 adjusting entry.

(b)        the sale of the Brady stock.

(c)        the purchase of the North Stores' stock.

(d)       the 2021 adjusting entry. (10 points)

Answer 1

	(a)	Adjusting entries of 2020
	Date	Particulars	Debit	Credit
	31-12-2020	Investment in common shares of Brady. Corp	10,000
		To Unrealized holiding gain- OCI		10,000
	31-12-2020	Unrealized holiding loss- OCI	25,000
		To Investment in common shares of Sanders, Inc.		25,000
	31-12-2020	Unrealized holiding loss- OCI	15,000
		To Investment in preferred shares of Peters, Inc.		15,000
	(b)	Sale of Brady Stock
	Date	Particulars	Debit	Credit
	01-03-2021	Bank A/c	1,70,000
		Unrealized holding gain- OCI	3,333
		To Investment in common shares of Brady. Corp		1,53,333
		To Realized gain on sale- Statement of profit & loss		20,000
	(c)	Purchase of North Stores Stock
	Date	Particulars	Debit	Credit
	01-08-2021	Investment in common shares of North Stores	41,000
		To Bank A/c		41,000
	(d)	Adjusting entries of 2021
	Date	Particulars	Debit	Credit
	31-12-2021	Unrealized holiding gain- OCI	6,667
		Unrealized holiding loss- OCI	20,000
		To Investment in common shares of Brady. Corp		26,667
	31-12-2021	Investment in common shares of Sanders, Inc.	12,000
		To Unrealized holiding loss- OCI		12,000
	31-12-2021	Investment in common shares of North Stores	1,000
		To Unrealized holiding gain- OCI		1,000
	31-12-2021	Investment in preferred shares of Peters, Inc.	25,000
		To Unrealized holiding loss- OCI		15,000
		To Unrealized holiding gain- OCI		10,000