Presented below is information related to the purchases of common stock by Sage

Question

Presented below is information related to the purchases of common stock by Sage Company during 2017.

Cost
(at purchase date)

Fair Value
(at December 31)

In addition, assume that the investment in the Woods Inc. stock was sold during 2018 for $205,000. At December 31, 2018, the following information relates to its two remaining investments of common stock.

Cost
(at purchase date)

Fair Value
(at December 31)

Net income before any security gains and losses for 2018 was $959,000.

(a) Compute the amount of net income or net loss that Sage should report for 2018, taking into consideration Sage’s security transactions for 2018, assuming Sage did not select the fair value option for investments in the Lee and Woods corporations.

(b) Prepare the journal entry to record unrealized gain or loss related to the investment in Arroyo Company stock at December 31, 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date

Account Titles and Explanation

Debit

Credit

Cost
(at purchase date)

Fair Value
(at December 31)

Investment in Arroyo Company stock $97,000 $77,000 Investment in Lee Corporation stock 251,000 301,000 Investment in Woods Inc. stock 189,000 198,000     Total $537,000 $576,000

Explanation / Answer

a Net income befor gain or loss 959000 Gain on sale of woods inc 16000 Unrealized gain in 2018 61000 1036000 Woods Sale price 205000 Woods Stock 189000 Gain on sale of woods inc 16000 Unrealized gain in 2018 (138000-77000) 61000 b 12/31/2018 Equity Investments (Arroyo ) 61000 Unrealized Holding (Gain/Loss) 61000

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