Fair Value Journal Entries, Available-for-Sale Investments Lipscomb Inc. purchas
ID: 2470510 • Letter: F
Question
Fair Value Journal Entries, Available-for-Sale Investments
Lipscomb Inc. purchased a portfolio of available-for-sale securities in 2014, its first year of operations. The cost and fair value of this portfolio on December 31, 2014, was as follows:
On May 10, 2015, Lipscomb purchased 550 shares of Violet Inc. stock at $29 per share plus a $80 brokerage fee.
Provide the journal entries to record the following:
1The adjustment of the available-for-sale security portfolio to fair value on December 31, 2014.
2The May 10, 2015, purchase of Violet Inc. stock.
Name Number of Shares Total Cost Total Fair Value Jasper, Inc. 1,100 $14,740 $16,360 Parker Corp. 800 26,240 28,600 Smithfield Corp. 300 8,700 8,270 Total $49,680 $53,230Explanation / Answer
a. 1.
2015
Dec. 31 Valuation Allowance for Available-for-
Sale Investments.......................................................... 3,550
Unrealized Gain (Loss) on Available-for-
Sale Investments.................................................... 3,550
To record increase in fair value of available-
for-sale investments, $53,230 - $49,680.
2.
2015
May 10 Investments—Violet Inc............................................... 16,030*
Cash......................................................................... 16,030
*(550 shares × $29 per share) + $80
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