On December 31, 2011, Walden owned the following securities that are held as a l

Question

On December 31, 2011, Walden owned the following securities that are held as a long-term investment. The securities are not held for influence or control of the investee.

                                    Common Stock                       Shares                          Cost

                                    X Co.                                      2,000                           $90,000

                                    Y Co.                                      5,000                           45,000

                                    Z Co.                                       1,500                           30,000

On this date, the total fair value of the securities was equal to its cost. In 2012, the following transactions occurred:

July      1          Received $1 per share semiannual cash dividend on Y Co. Common Stock.

8 Received 4,000 shares of X Co. Common Stock in a 3 for 1 stock split.

Required

(a)  Journalize the two transactions above. If no journal entry is required put N/A next to the date.

July 1

July 8

(b) Assuming at December 31, 2011 (Ignore 2012 activity) the fair values per share of the common stocks were: X Co. $10, Y Co. $8, and Z Co. $5prepare the adjusting entry to show the securities at fair value assuming they are classified as "available-for-sale securities".

(c)   Indicate where any unrealized gain/loss would be reported (Income Statement or Balance Sheet?).

Explanation / Answer

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