Answer:
(a) Dec. 31, 2020
Dr Unrealized Holding Gain or Loss- Income $1,610
Cr Fair value adjustment $1,610
(b) During 2021
Dr Cash $10,350
Dr Loss on sale of investment $550
Cr Equity Investment (trading) $10,900
(c) Dec. 31, 2021
Dr Fair value Adjustment $1,100
Cr Unrealized Holding gain or loss - Income $1,100
Explanation:
(a) Preparation of the adjusting journal entry needed on December 31, 2020
Dec. 31, 2020
Dr Unrealized Holding Gain or Loss- Income $1,610
Cr Fair value adjustment $1,610
(b) Preparation of the journal entry to record the sale of the Colorado Co. stock during 2021
During 2021
Dr Cash $10,350
Dr Loss on sale of investment $550
($10,900-$10,350)
Cr Equity Investment (trading) $10,900
(c) Preparation of the adjusting journal entry needed on December 31, 2021
Dec. 31, 2021
Dr Fair value Adjustment $1,100
Cr Unrealized Holding gain or loss - Income $1,100
Calculation for Fair value Adjustment
Cost FV Profit Unrealized Gain (Loss)
Clemson Corp. stock $20,400-$19,390 =$1,010
Buffaloes Co. stock $20,400-$20,900=-$500
Total portfolio $40,800 $40,290 ($510)
Previous Fair value adjustment $1,610
Unrealized Holding Gain $1,100
($1,100-$510)
