On December 31, 2017, Turnball Associates owned the following securities, held a

Question

On December 31, 2017, Turnball Associates owned the following securities, held as a long-term investment. The securities are not held for influence or control of the investee.

Common Stock

Shares

Cost

On December 31, 2017, the total fair value of the securities was equal to its cost. In 2018, the following transactions occurred.

At December 31, the fair values per share of the common stocks were: Gehring Co. $30, Wooderson Co. $7, and Kitselton Co. $20.

Instructions

1. Journalize the 2018 transactions and post to the account Stock Investments. (Use the T-account form.)

2. Prepare the adjusting entry at December 31, 2018, to show the securities at fair value. The stock should be classified as available-for-sale securities.

3. Show the balance sheet presentation of the investments at December 31, 2018. At this date, Turnball Associates has common stock $1,562,000 and retained earnings $1,076,000.

Common Stock

Shares

Cost

Gehring Co. 1,900 $53,200 Wooderson Co. 5,000 40,000 Kitselton Co. 1,800 39,600

Explanation / Answer

Answer:

(a) 2018 Aug. 1 Cash (1900 X $.50) 950 Dividend Revenue 950 Sept. 1 Cash [(1,500 X $7) ] 10500 Loss on Sale of Stock Investments
   ($12000 – $10500) 1500 Stock Investments (1,500 X $8) 12000 Oct 1 Cash [(760 X $31)] 23560 Stock Investments (760 X $28) 21280 Gain on Sale of Stock Investments 2280 Nov 1 Cash (1800 X $1) 1800 Dividend Revenue 1800 Dec. 15 Cash (1140 X $0.50) 570 Dividend Revenue 570 Dec 31 Cash (3500 X $1) 3500 Dividend Revenue 3500 Stock Investments 2018 2018 Jan. 1 Balance 132,800 Sept. 1 12,000 Oct. 1 21,280 2018 Dec. 31 Balance 99,520 (b) Dec. 31 Unrealized Gain or Loss—Equity (99520-94700) 4,820 Market Adjustment—Available-for-Sale
    4,820 Security Cost Fair Value Gehring Co. common $31,920 $34,200 (1140*30) Wooderson Co. common 28,000 24,500 (3500*7) Kitselton Co. common 39,600 36,000 (1800*20) $99,520 $94,700 (c ) Investments    Investments in stock of less than    20% owned companies, at fair value $94,700 Stockholders' equity     Common stock $1,562,000     Retained earnings 1,076,000          Total paid-in capital and retained earnings 2,638,000      Less: Unrealized loss on available-for-sale securities 4,820           Total stockholders' equity $2,633,180

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