Answer:
a. Determine the amount Stoll should report on its December 31, 2017, balance sheet for its long-term investments in available-for-sale securities.
- Company B notes $82,300
- Company C bonds $603,800
- Company X bonds $120,000
- Company Z notes $276,000
b. (same as c.)Prepare any necessary December 31, 2017, adjusting entry to record the fair value adjustment for the long-term investments in available-for-sale securities.
- Dr Company B notes 4,800
- Cr Unrealized gain on Company B notes 4,800 (= $82,300 - $77,500)
- Dr Unrealized loss on Company C bonds 38,340 (= $603,800 - $642,140)
- Cr Company C bonds 38,340
- Dr Unrealized loss on Company X bonds 2,100 (= $120,000 - $122,100)
- Cr Company X bonds 2,100
- Dr Company Z notes 8,100
- Cr Unrealized gain on Company Z notes 8,100 (= $276,000 - $267,300)
Explanation:
beginning of the year cost fair value
Company A bonds $534,100 $492,000
Company B notes $159,140 $155,000
Company C bonds $662,400 $642,140
since available for sale assets must be recorded at fair value, we must assume that the company prepared the adjusting entries at the end of the previous year (unrealized gains or losses):
Jan. 29 Sold one-half of the Company B notes for $78,820.
Dr Cash 78,820
Cr Company B notes 77,500
Cr Gain on sale of Company B notes 1,320
July 6 Purchased bonds of Company X for $122,100.
Dr Company X bonds AFS 122,100
Cr Cash 122,100
Nov. 13 Purchased notes of Company Z for $267,300.
Dr Company Z bonds AFS 267,300
Cr Cash 267,300
Dec. 9 Sold all of the bonds of Company A for $524,800.
Dr Cash 524,800
Cr Company A notes 492,000
Cr Gain on sale of Company B notes 32,800
