Stoll Co.’s long-term available-for-sale portfolio at December 31, 2016, consist
ID: 2544085 • Letter: S
Question
Stoll Co.’s long-term available-for-sale portfolio at December 31, 2016, consists of the following.
Stoll enters into the following long-term investment transactions during year 2017.
The fair values of its investments at December 31, 2017, are: B, $162,750; C, $1,220,625; W, $382,500; X, $236,250; Y, $1,062,500; and Z, 557,600.
Required:
1. Determine the amount Stoll should report on its December 31, 2017, balance sheet for its long-term investments in available-for-sale securities.
2. Prepare any necessary December 31, 2017, adjusting entry to record the fair value adjustment for the long-term investments in available-for-sale securities.
Prepare any necessary December 31, 2017, adjusting entry to record the fair value adjustment for the long-term investments in available-for-sale securities.
Record the year-end adjusting entry for the securities portfolio as of December 31, 2017.
Note: Enter debits before credits.
3. What amount of gains or losses on transactions relating to long-term investments in available-for-sale securities should Stoll report on its December 31, 2017, income statement?
Available-for-Sale Securities Cost Fair Value 80,000 shares of Company A common stock $ 1,070,600 $ 980,000 14,000 shares of Company B common stock 318,750 308,000 35,000 shares of Company C common stock 1,325,500 1,281,875Explanation / Answer
Answer 1. Dec 31, 2016 No. of Shares Cost Fair Value Difference Company A 80,000 1,070,600.00 980,000.00 (90,600.00) Company B 14,000 318,750.00 308,000.00 (10,750.00) Company C 35,000 1,325,500.00 1,281,875.00 (43,625.00) Total 2,714,850.00 2,569,875.00 (144,975.00) Dec 31, 2017 No. of Shares Cost Fair Value Difference Company B 7,000 159,375.00 162,750.00 3,375.00 Company C 35,000 1,325,500.00 1,220,625.00 (104,875.00) Company X 9,000 256,625.00 236,250.00 (20,375.00) Company Z 17,000 540,700.00 557,600.00 16,900.00 Total 1,484,875.00 1,383,375.00 (101,500.00) Less - 2016 Unrealises Loss (144,975.00) Net Unrealized Gain 43,475.00 Answer 2. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 31-Dec-17 Fair Value Adjustment (AFS - Long Term) 43,475.00 Unrealized Loss Equity 43,475.00 Answer 3. Company B Sale of 7,000 Shares 155,275 Cost of 7,000 Shares - $318,750 X (7,000/14000) 159,375 Gain (Loss) on sale of Shares (4,100.00) Company A Sale of 80,000 Shares 1,025,900 Cost of 80,000 Shares 1,070,600 Gain (Loss) on sale of Shares (44,700.00) Total Gain(Loss) on sale of shares (48,800.00)
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