On March 10, 2009, Global Solutions, Inc., purchased 5,000 shares of Superior Te
ID: 2372092 • Letter: O
Question
On March 10, 2009, Global Solutions, Inc., purchased 5,000 shares of Superior Technologies stock for $50 per share. The following information pertains to the price per share of Superior Technologies stock:
Price
12/31/2009 $ 45
12/31/2010 $ 42
Required:
Assume that management considers
the stock to be securities available for sale. Prepare the journal
entries required on each date given. (Omit the "$" sign in your
response.)
Date General Journal Debit Credit
March 10, 2009
Dec. 31, 2009
Dec. 31, 2010
Explanation / Answer
3/10/2009:
DR: Investment in Superior Tech - $250,000 ($50 x 5,000)
CR: Cash - 250,000
12/31/2009:
Book value= $250,000
Fair value= 225,000 ($45 x 5,000)
Total fair value adjustment= (25,000) [Fair value - Book value]
Existing balance in fair value adjustment account= 0
Increase (decrease) needed= (25,000)
DR: Net unrealized gains & losses - $25,000
CR: Fair value adjustment - 25,000
12/31/2010:
Book value= $250,000
Fair value= 210,000 ($42 x 5,000)
Total fair value adjustment= (40,000)
Existing balance in fair value adj. account= (25,000)
Increase (decrease) needed= (15,000)
DR: Net unrealized gains & losses - $15,000
CR: Fair value adjustment - 15,000
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