Castleman Holdings, Inc. had the following available-for-sale investment portfol

Question

Castleman Holdings, Inc. had the following available-for-sale investment portfolio at January 1, 2010.
1,000 shares of Evers Company at $21.00 per share $21,000
900 shares of Rogers Company at $24.00 per share $21,600
500 shares of Chance Company at $7.00 per share $3,500
Available-for-sale securities at cost: $46,100
Securities fair value adjustment-Available-for-sale - Credit balance ($7,500)
Available-for-sale securities at fair value: $38,600

During 2010, the following transactions took place:
1. On March 1, Rogers Company paid a $2.50 per share dividend.
2. On April 30, Castleman Holdings, Inc. sold 300 shares of Chance Company
for $10.00 per share
3. On May 15, Castleman Holding, Inc. purchased 100 more shares of Evers Co.
stock at $12.00 per share
4. At December 31, 2010, the stocks had the following price per share values:
Evers Company $23.00
Rogers Company $22.50
Chance Company $9.00
During 2011, the following transactions took place:
5. On February 1, Castleman Holding, Inc. sold the remaining Chance shares for $8.50
per share.
6. On March 1, Rogers Company paid a $3.00 per share dividend.
7. On December 21, Evers Company declared a cash dividend of $2.00 per share to be
paid in the next month.
8. At December 31, 2011, the stocks had the following price per share values:
Evers Company $24.00
Rogers Company $23.00


(a) Prepare journal entries for each of the above transactions.
(b) Prepare a partial balance sheet showing the Investments account at December 31, 2010 and 2011.

Explanation / Answer

(a)

1 Mar 1, 10 Cash 2,250 Dividend Revenue ($2.50 × 900 shares) 2,250 2 Apr 30, 10 Cash 3,000 Gain on Sale of Inv [($10-$7)×300 sh] 900 Equity Investments (Available-for-Sale) 2,100 3 May 15, 10 Equity Investments (Available-for-Sale) 1,200 Cash ($12.00 × 100 shares) 1,200 4 Dec 31, 10 Fair Value Adjustment
       (Available-for-Sale) 9,650 Unrealized Holding Gain or Loss-Equity 9,650 Security Cost Fair
Value Unrealized
Gain (Loss) Evers Company ($21,000 + $1,200) 22,200 [(1,000 sh + 100 sh) × $23.00 per sh] 25,300 3,100 Rogers Company ($21,600) 21,600 (900 sh × $22.50 per sh] 20,250 (1,350) Chance Company ($3,500 - $2,100) 1,400 [(500 sh - 300 sh) × $9.00 per sh] 1,800 400 Total of Portfolio 45,200 47,350 2,150 Previous securities fair value adjustment bal.—Cr. (7,500) Securities fair value adjustment—Dr. 9,650 5 Feb 1, 11 Cash ($8.50 × 200 shares) 1,700 Loss on Sale of Inv [($9-$7)×200 sh] (300) Equity Investments (Available-for-Sale) 1,400 6 Mar 1, 11 Cash ($3.00 × 900 shares) 2,700 Dividend Revenue 2,700 7 Dec 21, 11 Dividends Receivable ($2.00 × 1,100 sh) 2,200 Dividend Revenue 2,200 8 Dec 31, 11 Fair Value Adjustment
       (Available-for-Sale) 1,150 Unrealized Holding Gain or Loss-Equity 1,150 Security Cost Fair
Value Unrealized
Gain (Loss) Evers Company ($21,000 + $1,200) 22,200 [(1,000 sh + 100 sh) × $24.00 per sh] 26,400 4,200 Rogers Company ($21,600) 21,600 (900 sh × $23.00 per sh] 20,700 (900) Total of Portfolio 43,800 47,100 3,300 Previous securities fair value adjustment bal.—Cr. 2,150 Securities fair value adjustment—Dr. 1,150 (b) Partial Balance Sheet as of: December 31, 2010 December 31, 2011 Current Assets - Dividends Receivable $0 $2,200 Investments: Available-for-sale securities, at fair value $47,350 $47,100 Stockholders' equity: Accumulated other comprehensive gain $2,150 $3,300

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