Trading equity securities. Korman Company has the following securities in its po

Question

Trading equity securities.
Korman Company has the following securities in its portfolio of trading equity securities on December 31, 2014:
Cost Fair Value
5,000 shares of Thomas Corp., Common $151,000 $139,000
10,000 shares of Gant, Common 182,000 190,000
$333,000 $329,000


All of the securities had been purchased in 2014. In 2015, Korman completed the following securities transactions:
March 1 Sold 5,000 shares of Thomas Corp., Common @ $31 less fees of $1,500.
April 1 Bought 600 shares of Werth Stores, Common @ $45 plus fees of $550.

The Korman Company portfolio of trading equity securities appeared as follows on December 31, 2015:
Cost Fair Value
10,000 shares of Gant, Common $185,000 $195,500
600 shares of Werth Stores, Common 27,550 25,500

$209,550 $221,000

Instructions
Prepare the general journal entries for Korman Company for:
(a) the 2014 adjusting entry.
(b) the sale of the Thomas Corp. stock.
(c) the purchase of the Werth Stores' stock.
(d) the 2015 adjusting entry.

Explanation / Answer

Solution-

(a)                                                      12-31-14

       Unrealized Holding Gain or Loss—Income............................        4,000

                 Securities Fair Value Adjustment...............................                         4,000

                   ($333,000 – $329,000)

(b)                                                     3-1-15 (the sale of the Thomas Corp. Stock)

       Cash [(5,000 *$31-1500) .................................................     153,500

                  Profit on Sale of Equity Investment.........................                          2,500

                 Equity Investment................................. ………………..                     151,000

(c)                                                      4-1-15 (the purchase of the Werth Stores' stock)

       Equity Investment...........................................................      27,550

                 Cash [(600* $45+550) ..........................................                       27,550

(d)                                                      2015

       Securities Fair Value Adjustment [4000+11,450(221,000-209,550]   15,450

                 Unrealized Holding Gain or Loss—Income..................                       15,450

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