Problem 1, 8 points tlelow is in ormation regarding investments held by Harriton

Question

Problem 1, 8 points tlelow is in ormation regarding investments held by Harriton Company at the, erd of current year n Part a: Hamilton Company owns 50,000 shares of Browning Company stock The alue of the Browning What is the amount of change in value of the shares have a cost basis of $500,000. The current market v 00 per share. Browning Company stock held by Hamilton Company? Be sure to show y computations, (4 points) Part b, Prepare the necessary journal entry to record the fair value adjustment at year- end in the space provided below. (4 points)

Explanation / Answer

Investments of Hamilton Company

Cost per unit of stock

Therefore, the reduction in the value of Browning Company is $50,000.

Investments of Hamilton Company

Units Cost

Cost per unit of stock

Stock of Browning Company 50,000 $500,000.00 $10.00 Current market value 50,000 $450,000.00 $9.00 Reduction in value -$50,000.00

Therefore, the reduction in the value of Browning Company is $50,000.

Journal Entry for fair value adjustment Unrealized Loss on holdings A/c ...(Debit) $50,000.00 To Stock of Browning Company A/c ...(Credit) $50,000.00

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