The investments of Frozen Inc. include a single investment: 29,000 shares of Sum

Question

The investments of Frozen Inc. include a single investment: 29,000 shares of Summer Inc. common

      stock purchased on February 24, 2014, for $76 per share including brokerage commission. These

      shares were classified as trading securities. As of the December 31, 2014, balance sheet date, the

      share price had increased to $84 per share.

                A. Journalize the entries to acquire the investment on February 24, and record the adjustment to fair

     value on December 31, 2014.

B. How is the unrealized gain or loss for trading investments reported on the financial statements?

Explanation / Answer

No. Of Shares Cost Cost per Share Market Price per Share-Dec31, 2014 Total Market Price Difference A B C = A X B D E = D X A F = E - B Summer Inc.          29,000    2,204,000               76                               84      2,436,000         232,000 Answer A. Journal Entry Date Particulars Dr. Amt. Cr. Amt Feb-24 Trading Investments                                   Dr.    2,204,000 2014 To Cash    2,204,000 (Purchase of Shares of Summer Inc. as Trading Securities) Dec. 31, Trading Investments                                  Dr.       232,000 2014 To U. Gain on Trading Investments       232,000 (Record the unrealized gain on Trading Investment) Answer B. Unrealized Gain on Trading investments of $232000 as Other Income in Income Statement.

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