Answer:
(a)
Dr Unrealized Holding Gain or Loss -Equity $1,410
Cr Fair Value Adjustment $1,410
(b)
Dr Cash $9,410
Dr Loss on Sale of Investment $590
Cr Equity Investment $10,000
(c)
Dr Fair Value Adjustment $1,120
Cr Unrealized Holding Gain or Loss-Equity $1,120
Explanation:
(a) Preparation of the adjusting journal entry needed on December 31, 2017.
Dr Unrealized Holding Gain or Loss -Equity $1,410
Cr Fair Value Adjustment $1,410
(To Adjust to Fair Value for 2017)
(b) Preparation of the journal entry to record the sale of the Colorado Co. stock during 2018.
Dr Cash $9,410
Dr Loss on Sale of Investment $590
(20,200- 20,790)
Cr Equity Investment $10,000
($9,410+$590)
(To Record Sale of Stock)
(c)Preparation of the adjusting journal entry needed on December 31, 2018.
Dr Fair Value Adjustment $1,120
Cr Unrealized Holding Gain or Loss-Equity $1,120
(To Adjust to Fair Value for 2018)
Investments Amortized Costs, Fair Value , Unrealized Gain (Loss)
Clemson Corp. stock
$20,200 $19,410 ($790)
Buffaloes Co. stock
$20,200 $20,700 $500
$40,400 $40,110 ($290)
Previous Fair Value Adjustment (Credit)
$1,410
Fair Value Adjustment (Debit)$1,120
