Answer:
a) Debit fair value loss $7,900 Credit Investment $7,900
b) Debit Bank $66,300, Debit Fees $1,200 Credit investment $67,500
c) Debit investment $53,800, Credit Fees $1,300 Credit Bank $52,500
d) Debit Fair value loss $10,400 Credit Investment $10,400
Explanation:
c) the purchase of stock include fees and the fees are included in the cost of the shares and increase the cost of the asset hence they are capitalised on the cost. The fees are an expense directly associated with the purchase therefore are attributable costs.
the completed question
E17-15
(Equity InvestmentsTrading) Culver company has the following securities in its trading port- folio of securities on December 31, 2020.
Investments (Trading) Cost Fair Value
1,500 shares of Gordon, Inc., Common $73,500 $ 69,000
5,000 shares of Wallace Corp., Common 180,000 175,000
400 shares of Martin, Inc., Preferred 60,000 61,600
$313,500 $305,600
All of the securities were purchased in 2020.
In 2014, Culver completed the following securities transactions.
March 1Sold 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 Companys portfolio of trading securities appeared as follows on December 31, 2021
Investments (Trading) Cost Cost Fair Value
5,000 shares of Wallace Corp., Common $180,000 $175,000
700 shares of Earnhart Corp. Common 53,800 $50,400
400 shares of Martin, Inc. Preferred 60,000 $58,000
293,800 283,400
Instructions
Prepare the general journal entries for Culver Company for:
(a)The 2020 adjusting entry.
(b) The sale of the Gordon stock.
(c)The purchase of the Earnhart stock.
(d) The 2021 adjusting entry for the trading portfolio
