Armadillo Enterprises acquired the following equity investments at the beginning
ID: 2500240 • Letter: A
Question
Armadillo Enterprises acquired the following equity investments at the beginning of year 1 as trading investments.
Description
Finestra Company
BVD Company
Number of shares
15,000
20,000
Market price per share
X $25
X$18
Total price
$387,500
$360,000
Market values at the end of Years 1 &2 are presented below:
Market/Fair Value
Finestra Company
BVD Company
End of year 1
$19
$22
End of year 2
$23
$28
REQUIREMENTS: (45 points)
Prepare the journal entry to record the acquisition of the investments.
Prepare the adjusting journal entry required at the end of year 1.
Armadillo Enterprises sells 15,000 shares of BVD Company for $16 at the beginning of year 2. Prepare the journal entry to record the sale.
Prepare the adjusting journal entry required at the end of year 2.
Assume that Armadillo Enterprises now holds these investments as available-for-sale.
Prepare the journal entry to record the acquisition of the investments.
Prepare the adjusting journal entry required at the end of year 1.
Armadillo Enterprises sells 15,000 shares of BVD Company for $16 at the beginning of year 2. Prepare the journal entry to record the sale.
Prepare the journal entry to record the sale of all the remaining shares in Armadillo’s portfolio (both Finestra and BVD Company) for $496,500 at the end of year 2.
Description
Finestra Company
BVD Company
Number of shares
15,000
20,000
Market price per share
X $25
X$18
Total price
$387,500
$360,000
Explanation / Answer
Accounting as trading investment at the time of the acquisition of the investment Investment in trading sec. A/c Dr. 387,500.00 To cash A/c 387,500.00 (being finestra company 15000 shares purchased @ 25$) Investment in trading sec. A/c Dr. 360,000.00 To cash A/c 360,000.00 (being BVD company 20000 shares purchased @ 18$) at the end of the year Loss on trading investment 10,000.00 To Investment in trading sec. A/c 10,000.00 ( being $6 loss incurred on Finestra comp. & $4 profit incurred on BVD comp. shares) at the beginning of the year 2 Cash A/c Dr. 240,000.00 Loss on sale of invest. 90,000.00 To Investment in trading Sec. 330,000.00 Accounting as available for sale Investment available for sale A/C Dr. 387,500.00 To cash 387,500.00 ( being shares purchase as available for sale of Finestra Company) Investment available for sale A/C Dr. 360,000.00 To cash 360,000.00 ( being shares purchase as available for sale of BVD Company) at the end of the year Loss on available-for-sale securities (recorded in other comprehensive income) 10,000 To Investments – Available-for-sale 10,000 ( being $6 loss incurred on Finestra comp. & $4 profit incurred on BVD comp. shares) Cash A/c Dr. 240,000.00 Loss on available-for-sale securities (recorded in other comprehensive income) 90,000.00 To Investment in trading Sec. 330,000.00 (being loss incurred on selling of sec.)
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.