Trading equity securities. Korman Company has the following securities in its po

Question

Trading equity securities.
Korman Company has the following securities in its portfolio of trading equity securities on December 31, 2010:
Cost Fair Value
5,000 shares of Thomas Corp., Common $155,000 $139,000
10,000 shares of Gant, Common 182,000 190,000
$337,000 $329,000


All of the securities had been purchased in 2010. In 2011, Korman completed the following securities transactions:
March 1 Sold 5,000 shares of Thomas Corp., Common @ $31 less fees of $1,500.
April 1 Bought 600 shares of Werth Stores, Common @ $45 plus fees of $550.

The Korman Company portfolio of trading equity securities appeared as follows on December 31, 2011:
Cost Fair Value
10,000 shares of Gant, Common $182,000 $195,500
600 shares of Werth Stores, Common 27,550 25,500 $209,550 $221,000


Instructions
Prepare the general journal entries for Korman Company for:
(a) the 2010 adjusting entry.
(b) the sale of the Thomas Corp. stock.
(c) the purchase of the Werth Stores' stock.
(d) the 2011 adjusting entry.

Explanation / Answer

(a). Adjusting entry for 2010: Date Particulars L/F Dr $ Cr $ Unrealized loss on trading investments 16,000              Valuation allowence for trading 16,000 (to record decrease in fair value) Valuation allwence for trading investments 8,000             Unrealized gain on trading investment 8,000 (to record increase in fair value) Date Particulars L/F Dr $ Cr $ Unrealized loss on trading investments 16,000              Valuation allowence for trading 16,000 (to record decrease in fair value) Valuation allwence for trading investments 8,000             Unrealized gain on trading investment 8,000 (to record increase in fair value) (b). Date Particulars L/F Dr $ Cr $ Cash 153,500          Investments-Thomas corp., 153,500 (sale of 5,000 shares of thomas corp) (c). Date Particulars L/F Dr $ Cr $ Investments-Werth stores 27,000             Cash 27,000 (purchased 600 shares of Werth stores common stock (600 x $45))
(d). Adjusting entry for 2011: Date Particulars L/F Dr $ Cr $ Unrealized loss on trading investments 2,050              Valuation allowence for trading 2,050 (to record decrease in fair value Werth stores) Valuation allwence for trading investments 13,500             Unrealized gain on trading investment 13,500 (to record increase in fair value Gant stocks) Date Particulars L/F Dr $ Cr $ Unrealized loss on trading investments 2,050              Valuation allowence for trading 2,050 (to record decrease in fair value Werth stores) Valuation allwence for trading investments 13,500             Unrealized gain on trading investment 13,500 (to record increase in fair value Gant stocks) Date Particulars L/F Dr $ Cr $ Unrealized loss on trading investments 16,000              Valuation allowence for trading 16,000 (to record decrease in fair value) Valuation allwence for trading investments 8,000             Unrealized gain on trading investment 8,000 (to record increase in fair value)

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.