This Question: 1 pt 18 of 21 (0 complete) This Quiz: 25 pts possible Pansee Comp

Question

This Question: 1 pt 18 of 21 (0 complete) This Quiz: 25 pts possible Pansee Company had the following transactions pertaining to stock investments: a. February 1: Purchased 3,300 shares of Hudson Company 10% ownership at the market price of $20 per share. Pansee Company intends to keep the stock for more than one year and classifies the stock as available-for-sale. Received cash dividends of $8,000 on Hudson Company stock. End of accounting period. Fair value of Hudson Company stock is $64,000. The company uses an alowance account to adjust the investment. June 30: Which journal entry is prepared on June 30? ? A. debit Investment in Available-for-Sale Securities for S2.000 and credit Unrealized Gain on Investment in Available-for-Sale Securities for $2,000 O B. debit Unrealized Loss on Investment in Available-for-Sale Securities for $2,000 and credit Investment in Available-for-Sale Securities for $2,000 O C. debit Allowance to Adjust Investment in Available-for-Sale Securities to Market for $2,000 and credit Unrealized Loss on Investment in Available-for-Sale Securities for $2,000 O D. debit Unrealized Loss on Investment in Available-for-Sale Securities for $2,000 and credit Allowance to Adjust Investment in Available-for-Sale Securities to Market for $2,000

Explanation / Answer

Fair Value of Stock = $64,000

Cost of Stock = 3300 Shares x 20 = $66,000

Unrealized Loss on Investment = 66,000 - 64,000 = $2,000

So, the following journal entry is prepared for on June 30:

Debit Unrealized Loss on Investment in Available for Sale Securities $2,000

Credit Allowance to adjust investment in Available for Sale Securities to Market $2,000

hence, the correct option is D.

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