(Equity Investments) (LO 2) Kenseth Company has the following securities in its
ID: 2541871 • Letter: #
Question
(Equity Investments)
(LO 2) Kenseth Company has the following securities in its portfolio on December 31, 2017. None of these investments are accounted for under the equity method.
Investments
Cost
Fair Value
1,500 shares of Gordon, Inc., common
$73,500
$69,000
5,000 shares of Wallace Corp., common
180,000
175,000
400 shares of Martin, Inc., preferred
60,000
61,600
$313,500
$305,600
All of the securities were purchased in 2017.
In 2018, Kenseth completed the following securities transactions.
March 1
Sold the 1,500 shares of Gordon, Inc., common, @ $45 less fees of $1,200
April 1
Bought 700 shares of Earnhart Corp., common, @ $75 plus fees of $1,300
Kenseth's portfolio of equity securities appeared as follows on December 31, 2018.
Investments
Cost
Fair Value
5,000 shares of Wallace Corp., common
$180,000
$175,000
700 shares of Earnhart Corp., common
53,800
50,400
400 shares of Martin, Inc., preferred
60,000
58,000
$293,800
$283,400
Instructions
Prepare the general journal entries for Kenseth Company for:
(a)
The 2017 adjusting entry.
(b)
The sale of the Gordon stock.
(c)
The purchase of the Earnhart stock.
(d)
The 2018 adjusting entry for the portfolio.
Investments
Cost
Fair Value
1,500 shares of Gordon, Inc., common
$73,500
$69,000
5,000 shares of Wallace Corp., common
180,000
175,000
400 shares of Martin, Inc., preferred
60,000
61,600
$313,500
$305,600
Explanation / Answer
Journal Entries Date ACCT Title and explanation Debit Credit Dec - 31, 2017 Unrealized Gain (loss) in investment $7,900 To Investment in Securities $7,900 (To Adjustment for fair value of investment) ($ 313,500 - 305,600) March- 01, 2018 Cash Account $66,300 Commission $1,200 To Investment in Securities $67,500 (To Record the sales of shares of GORD Corp) (1500 Shares * $ 45 - $ 1200) April- 01, 2018 Investment in Securities(700 Shares X $ 75) $52,500 Commission $1,300 To Cash Account $53,800 (To Record the purchase of shares of Earnhot Corp) December- 31, 2018 Ivestment in Securities $10,400 To Unrealized Gain (loss) in investment $10,400 (To Record the adjustment entry for the year 2018)
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