Fair Value Journal Entries, Available-for-Sale Investments Lipscomb Inc. purchas
ID: 2474452 • Letter: F
Question
Fair Value Journal Entries, Available-for-Sale Investments
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 550 shares of Violet Inc. stock at $29 per share plus a $80 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.
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Balance Sheet Presentation of Available-for-Sale Investments
During 2014, Toney Corporation held a portfolio of available-for-sale securities having a cost of $201,000. There were no purchases or sales ofinvestments during the year. The market values at the beginning and end of the year were $237,200 and $191,000, respectively. The net income for 2014 was $184,900, and no dividends were paid during the year. The Stockholders' Equity section of the balance sheet was as follows on December 31, 2013:
Prepare the Stockholders' Equity section of the balance sheet for December 31, 2014.
Toney Corporation
Balance Sheet (selected Stockholders' Equity items)
December 31, 2014
Name Number of Shares Total Cost Total Fair Value Jasper, Inc. 1,100 $14,740 $16,360 Parker Corp. 800 26,240 28,600 Smithfield Corp. 300 8,700 8,270 Total $49,680 $53,230
Explanation / Answer
Date 31.12.2014
Jasper Inc - Available for Sale Security A/c Dr. $1620
To Proift -on available for sale security- $1620
(being difference of fair value and total cost accounted for)
Parker Corp - Available for Sale Security A/c Dr. $2360
To Proift -on available for sale security- $2360
(being difference of fair value and total cost accounted for)
Loss on available for sale of security A/c Dr. $430
To Smithfield Corp- Available for sale of Security A/c $430
Date : 10.05.2015
Violet Inc - Available for sale investment A/c Dr. $16030
To Bank A/c $16030
(Being Share held as available for sale of investment )
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