On December 21, 2017, Stellar Company provided you with the following informatio
ID: 2603268 • Letter: O
Question
On December 21, 2017, Stellar Company provided you with the following information regarding its equity investments.
December 31, 2017
Investments (Trading)
Cost
Fair Value
Unrealized Gain (Loss)
During 2018, Colorado Company stock was sold for $8,750. The fair value of the stock on December 31, 2018, was Clemson Corp. stock—$20,210; Buffaloes Co. stock—$21,650. None of the equity investments result in significant influence.
December 31, 2017
Investments (Trading)
Cost
Fair Value
Unrealized Gain (Loss)
Clemson Corp. stock $21,200 $20,100 $(1,100 ) Colorado Co. stock 9,300 8,200 (1,100 ) Buffaloes Co. stock 21,200 21,740 540 Total of portfolio $51,700 $50,040 (1,660 ) Previous fair value adjustment balance 0 Fair value adjustment—Cr. $(1,660 )Explanation / Answer
(a) unrealized loss on investment a/c Dr. $1100
To investment a/c $1100
( being difference in the cost and fair value of investment is recorded)
Unrealized loss on investment a/c Dr. $1100
To investment a/c .$1100
(Being difference in the cost and fair value is recorded)
Investment a/c Dr.$540
To unrealized gain on investment a/c $540
(Being differences in cost and fair value is recorded)
(b) in case of selling of investment the investment is valued at cost or NRV whichever is lower. In this case the investment will be valued at $8200 (fair value)
Cash A/c Dr. $8750
To investment A/c $8200
To profit on sale of investment A/c $550
(Being sale of investment is recorded )
(C) Investment A/c Dr. $110
To unrealized gain on investment A/c $110
($20210 - $20100 = $110)
Unrealized loss on investment A/c Dr. $90
To investment A/c $90
($21650 - $21740 = $90)
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