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	$	1,039,600		$	920,000
28,000 shares of Company B common stock		338,750			328,000
34,000 shares of Company C common stock		1,360,500			1,311,875

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

Jan.		29		Sold 14,000 shares of Company B common stock for $168,375 less a brokerage fee of $3,400.
Apr.		17		Purchased 21,000 shares of Company W common stock for $445,000 plus a brokerage fee of $3,100. The shares represent a 30% ownership in Company W.
July		6		Purchased 8,000 shares of Company X common stock for $258,125 plus a brokerage fee of $3,100. The shares represent a 12% ownership in Company X.
Aug.		22		Purchased 100,000 shares of Company Y common stock for $590,000 plus a brokerage fee of $7,900. The shares represent a 51% ownership in Company Y.
Nov.		13		Purchased 12,000 shares of Company Z common stock for $528,800 plus a brokerage fee of $5,900. The shares represent a 5% ownership in Company Z.
Dec.		9		Sold 80,000 shares of Company A common stock for $1,027,500 less a brokerage fee of $4,100.

The fair values of its investments at December 31, 2017, are: B, $167,750; C, $1,225,625; W, $387,500; X, $241,250; Y, $1,067,500; and Z, 562,600.

Problem 15-5A Part 1 and 2

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.

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?

Fair Value Adjustment Computation - Available-for-Sale Securities December 31, 2017 AFS Securities # of shares Cost Fair Value Unrealized Amount Total -1

• 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

Answer 1

	Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you.
	Part 1
	Available-for-sale securities on December 31, 2017
	Security	Cost	Fair Value
	14,000 shares of Company B common stock ($338,750/2)	$    169,375.00	$    167,750.00
	34,000 shares of Company C common stock	$1,360,500.00	$1,225,625.00
	8,000 shares of Company X common stock ($258,125+$3,100)	$    261,225.00	$    241,250.00
	12,000 shares of Company Z common stock ($528,800+$5,900)	$    534,700.00	$    562,600.00
	Total	$2,325,800.00	$2,197,225.00
	the amount Stoll should report on its December 31, 2017, balance sheet for its long-term investments in available-for-sale securities		$      2,197,225
	Part 2
Date	Account	Debit	Credit
Dec 31 2017	Fair Value Adjustment - AFS	$           50,400
	Unrealized Loss		$           50,400
	(to record unrealized loss on AFS)
Working:
	Beginning Balance
	Available-for-Sale Securities	Cost	Fair Value
	80,000 shares of Company A common stock	$      1,039,600	$         920,000
	28,000 shares of Company B common stock	$         338,750	$         328,000
	34,000 shares of Company C common stock	$      1,360,500	$      1,311,875
	Total	$      2,738,850	$      2,559,875
	Fair Value Balance as on Dec 31 2016		$         178,975	Credit Balance
	($2,738,850-$2,559,875)
	Fair Value Balance as on Dec 31 2017		$         128,575
	($2,197,225-$2,325,800)
	Debit to Fair Value Adjustment		$           50,400
	Part 3
	Only realized gain or loss is reported for AFS in income statement
	Stock Sold	Cost	Sale	Gain (Loss)
	14,000 Shares of B	$    169,375.00	$    164,975.00	$      -4,400.00
	80,000 Shares of A	$1,039,600.00	$1,023,400.00	$    -16,200.00
	Realized gain (loss)			$    -20,600.00