3. Accounting for Equity Securities (12 points) On its December balance i pertai

Question

3. Accounting for Equity Securities (12 points) On its December balance i pertains to the portfolio for 2017: Security Mildcats, Inc. Silence of the Rams Co. 130,000 Cornhusker 31, 2016 balance sheet, Buff Company appropriately reported a $8,000 debit n its Fair Value Adjustment-Equity Investments account. The following information Eair value at 12/31/17 $154,000 112,000 28,000 $294,000 Dividends Received in 2017 $2,000 $2,500 $150,000 33,000 $313,000 a) Buff Co. is a calendar year-end reporting company. By how much would Buff's overall net income be impacted from its investment in the portfolio for 2017? (3 pts) b) On 20 January 2018, Buff Co. sold its position in Silence of the Rams for $115,000. Please record the journal entry to recognize the sale. (2 pts) On 30 June 2018, Buff Co. purchased 10,000 shares of Beaver Company common stock at $24 per share. The investment is included in the Equity Investment portfolio. Please record the journal entry to record the purchase. (2 pts) c) At the end of 2018, Buff's portfolio had the following fair values: Fair value at 12/31/18 $163.000 Mildcats, Inc. Cornhusker Beaver Company 37,000 256,000 d) Record the adjusting journal entry to update the portfolio to fair value at 12/31/18. (5 pts)

Explanation / Answer

Solution:

Answer a .

By $31,500 Buff's overall net income / loss be impacted from investment in the portfolio in 2017.

Answer b.

Answer c.

Answer d.

Journal entry for d option

Security Cost ($) Fair value at 12/31/2017 ($) Gain (or) Loss ($) Wildcat, inc 150,000 154,000 4,000 Science of the Ram's co 130,000 112,000 18,000 Cornhusker 33,000 28,000 5,000 27,000 Add: Dividend received in 2017 Wildcat, inc 2,000 Science of the Ram's co 2,500 31,500

By $31,500 Buff's overall net income / loss be impacted from investment in the portfolio in 2017.

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