Question

Culver Company has the following securities in its portfolio on December 31, 2017. None of these investments are accounted for under the equity method. Investments Cost Fair Value 1,500 shares of Gordon, Inc., Common $77,600 $73,200 5,000 shares of Wallace Corp., Common 172,900 167,700 400 shares of Martin, Inc., Preferred 63,500 65,100 $314,000 $306,000 All of the securities were purchased in 2017. In 2018, Culver completed the following securities transactions. March 1 Sold the 1,500 shares of Gordon, Inc., Common, @ $45 less fees of $1,200. April 1 Bought 700 shares of Earnhart Corp., Common, @ $75 plus fees of $1,300. Culver’s portfolio of equity securities appeared as follows on December 31, 2018. Investments Cost Fair Value 5,000 shares of Wallace Corp., Common $172,900 $167,700 700 shares of Earnhart Corp., Common 53,800 50,100 400 shares of Martin, Inc., Preferred 63,500 61,700 $290,200 $279,500 Prepare the general journal entries for Culver Company for: (a) The 2017 adjusting entry. (b) The sale of the Gordon stock. (c) The purchase of the Earnhart stock. (d) The 2018 adjusting entry for the trading portfolio.

Answer 1

Answer:

unrealized loss (OCI)            500 debit

trading securities- wallace 5,200 debit

      trading securities gordon                4.200 credit

     trading securities - martin                 1,600 credit

cash                           66,300 debit

loss on investment     6,900 debit

   trading securities - gordon         73,200 credit

--to record sale of gordon securties --

trading securities earnhart corp 53,800 debit

                         cash                                53,800 credit

--to record purchase of earnhart--

unrelized loss(OCI)  7,100  debit

trading securities earnhart corp 3,700 credit

trading securities- wallace        3,400 credit

-- 2018 year-end adjustment--

Explanation:

gordon 77,600 - 73,200 =    (4,100)

wallace 172,900 - 167,700 = 5,200

martin 63,500 - 65,100 =    (1,600)  

         Total adjustment           (500)

We will declare as other comprehensive incoem the unrealized loss of 500 dollar for the period

At sale date we compare the proceeds and the cost to check for the earning or losses:

1,500 shares x $45 each less 1,200 fees = 66,300

                        gordon shares book value (73,200)

                       loss on investment                 6,900

Earnhart corp:

700 shares x $75 each plus 1,300 fees: 53,800

year-end adjusting 2018

earnhart 50,100 - 53,800 = (3,700)

wallace 61,700 - 65,100 =    (3,400)

martin   167,700 - 167,700 =         0

unrealized loss                    (7,1 00)