Lipscomb Inc. purchased a portfolio of available-for-sale securities in 2014, it

Question

Lipscomb Inc. purchased a portfolio of available-for-sale securities in 2014, its first year of operations. The cost and fair value of this portfolio on December 31, 2014, was as follows:

On May 10, 2015, Lipscomb purchased 600 shares of Violet Inc. stock at $31 per share plus a $150 brokerage fee.

Provide the journal entries to record the following:

1.) The adjustment of the available-for-sale security portfolio to fair value on December 31, 2014.

2.) The May 10, 2015, purchase of Violet Inc. stock.

Name Number of Shares Total Cost Total Fair Value Jasper, Inc. 1,050 $14,070 $15,620 Parker Corp. 700 22,960 25,030 Smithfield Corp. 350 10,850 10,310 Total $47,880 $50,960

Explanation / Answer

Name Number of Shares Total Cost Total Fair Value Gain /Loss Jasper, Inc. 1,050 14,070 15,620 1,550 Parker Corp. 700 22,960 25,030 2,070 Smithfield Corp. 350 10,850 10,310 -540 47,880 50,960 3,080 DR CR Available-for-sale investments 3,080 Gain on available-for-sale securities(record them in other comprehensive income) 3,080 DR CR Available-for-sale investments =(600*31)+150 18750 Cash 18750

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