Pearl, Inc. had the following equity investment portfolio at January 1, 2017. Ev
ID: 2531901 • Letter: P
Question
Pearl, Inc. had the following equity investment portfolio at January 1, 2017. Evers Company Rogers Company 950 shares @ $14 each 900 shares @ $20 each 480 shares @ $10 each $13,300 18,000 4,800 36,100 (7,260 ) $28,840 Chance Company Equity investments@ cost Fair value adjustment Equity investments @ fair value During 2017, the following transactions took place 1. On March 1, Rogers Company paid a $2 per share dividend. 2. On April 30, Pearl, Inc. sold 310 shares of Chance Company for $12 per share 3. On May 15, Pearl, Inc. purchased 90 more shares of Evers Company stock at $15 per share 4. At December 31, 2017, the stocks had the following price per share values: Evers $16, Rogers $19, and Chance $9. During 2018, the following transactions took place. 5. On February 1, Pearl, Inc. sold the remaining Chance shares for $9 per share. 6. On March 1, Rogers Company paid a $2 per share dividend 7. On December 21, Evers Company declared a cash dividend of $3 per share to be paid in the next month 8. At December 31, 2018, the stocks had the following price per share values: Evers $18 and Rogers $21.Explanation / Answer
Note:1
31-Dec-17
Evers Company
950 Shares @14 each
13300
Bought 90 Shares @15 each
1350
14650
Rogers Company
900 Shares @20 each
18000
Chance Company
(480-310)=170 Shares @ 10 each
1700
34350
Fair Value Adjustments (B/f)
(35270-34350)
920
Equity Investments @ fair value (1040*16+900*19+170*9)
35270
Note:2
31-Dec-18
Evers Company
950 Shares @14 each
13300
Bought 90 Shares @15 each
1350
14650
Rogers Company
900 Shares @20 each
18000
Chance Company
(480-310-170)=0 Shares
0
32650
Fair Value Adjustments (B/f)
(32170-31250)
4970
Equity Investments @ fair value (1040*18+900*21)
37620
Journal Entries for 2017
Particulars
Working
Dr.
Cr.
1
Cash A/c
900*2
1800
Dividend Income A/c
1800
2
Cash A/c
310*12
3720
Gain on Sale of Investments
(3720-3100)
620
Investment A/c (Share of Chance)
310*10
3100
3
Investment A/c (Share of Evers)
(90*15)
1350
Cash A/c
1350
Journal Entries for 2018
Particulars
Working
Dr.
Cr.
1
Cash A/c
170*9
1530
Loss on Sale of Investments
170
Investment A/c (Share of Chance)
170*10
1700
2
Cash A/c
900*2
1800
Dividend A/c
1800
Note :- Dividend is recognised only when right to receive dividend is established, since the record date for payment of dividend in not given in the question so assuming that right to receive dividend is not established we are not recognising divided income.
Pearl, Inc.
Partial Balance Sheet
31-Dec-2017
31-Dec-2018
$
$
Value of Equity Investments (Note 1 & 2)
35270
37620
35270
37620
Note:1
31-Dec-17
Evers Company
950 Shares @14 each
13300
Bought 90 Shares @15 each
1350
14650
Rogers Company
900 Shares @20 each
18000
Chance Company
(480-310)=170 Shares @ 10 each
1700
34350
Fair Value Adjustments (B/f)
(35270-34350)
920
Equity Investments @ fair value (1040*16+900*19+170*9)
35270
Note:2
31-Dec-18
Evers Company
950 Shares @14 each
13300
Bought 90 Shares @15 each
1350
14650
Rogers Company
900 Shares @20 each
18000
Chance Company
(480-310-170)=0 Shares
0
32650
Fair Value Adjustments (B/f)
(32170-31250)
4970
Equity Investments @ fair value (1040*18+900*21)
37620
Journal Entries for 2017
Particulars
Working
Dr.
Cr.
1
Cash A/c
900*2
1800
Dividend Income A/c
1800
2
Cash A/c
310*12
3720
Gain on Sale of Investments
(3720-3100)
620
Investment A/c (Share of Chance)
310*10
3100
3
Investment A/c (Share of Evers)
(90*15)
1350
Cash A/c
1350
Journal Entries for 2018
Particulars
Working
Dr.
Cr.
1
Cash A/c
170*9
1530
Loss on Sale of Investments
170
Investment A/c (Share of Chance)
170*10
1700
2
Cash A/c
900*2
1800
Dividend A/c
1800
Note :- Dividend is recognised only when right to receive dividend is established, since the record date for payment of dividend in not given in the question so assuming that right to receive dividend is not established we are not recognising divided income.
Pearl, Inc.
Partial Balance Sheet
31-Dec-2017
31-Dec-2018
$
$
Value of Equity Investments (Note 1 & 2)
35270
37620
35270
37620
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.