AJMAN Company has the following securities in its investment portfolio on Decemb

Question

AJMAN Company has the following securities in its investment portfolio on December 31, 2014 (all securities were purchased in 2014) (1) 5,000 of Khor Co. stock which cost $81,590, (2) 3,000 of Dubai Ltd. stock which cost $152,780, and (3) 12,000 of Meer Company preferred stock which cost $560,000. The Fair Value Adjustment account shows a debit of $8,300 at the end of 2014 In 2015, AJMAN completed the following securities transactions. of Khor's stock at $18 per share less fees of $3,500. On June 6, purchased 9,000 of Seeb fees of $2,800. 2. stock at $21.70 per share plus 31, 2015, the market values per share of these securities . Dubai: $62.50, . Meer: . Seeb: $46.00 $23.00 the accounting supervisor of AJMAN told you that, even though intends to hold rties have readiy determinable fair values, A i not eterminable fair v actively trade these securities because the top them for more than one year. Calculate the gain or loss on the security sale on March 1 (b) Prepare (c) Prepare the journal entry to record the security purchase on June 6, 2015 7, 2015 (5 marks) (3 marks) (2 marks) the entry for the security sale on March 17, 2015. the unrealized gains or losses for AJMAN on December 31, 2015. (10 marks) (2 marks) (e) Prepare the adjusting entry for AJMAN on December 31, 2015. (1) How should the unrealized gains or losses of AJMAN's be reported? (3 marks) CASE ANALYSIS

Explanation / Answer

Purchases Sales Closing Shares Name of Company Shares Cost price Value Fees Net cost proce Shares Sales Price Value Fees Net Sales value Shares Cost price Value Fair rate Fair value Gain Khor Co.        5,000          16.32                 81,590         (5,000)                  18    (90,000)          3,500                 (86,500)                -                 4,910 Dubai Ltd        3,000          50.93              1,52,780                -           3,000      1,52,780 62.5      1,87,500 Meer Company      12,000          46.67              5,60,000                -        12,000      5,60,000 46      5,52,000 Total Value              7,94,370 2014 fair Value Adjustment                    8,300            8,300 Total Value              8,02,670 Seeb 9000 21.7 195300 2800              1,92,500         9,000      1,92,500 23      2,07,000      29,000        1,95,300          2,800           25,92,210         (5,000)                  18    (90,000)          3,500                 (86,500)      24,000                   -        9,13,580      9,46,500               4,910 Unrealised Gain (946500-913580-9000)          23,920 (a) Gain on sale on March 17,2017              4,910 Fair value Adjustment             32,920 Less: Provided in 2014               9,000 to be provided in 2015             23,920 (b) Dr Cr Cash 86500      Investment 81590     Gain on Investment 4910 (c ) Investment 192500     Cash 192500 (d ) Unrealised gain           23,920 (e ) Adjusting Entry Investment 23920     Unrealised gain 23920 (f ) A business calculates an unrealized gain on available-for-sale securities the same as it does for trading securities, but it records the unrealized gain in the stockholders’ equity section of the balance sheet on a line called “accumulated other comprehensive income.” This income increases stockholders’ equity directly without affecting net income on the income statement or retained earnings on the balance sheet.

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