[The following information applies to the questions displayed below.] Stoll Co.’

Question

[The following information applies to the questions displayed below.]

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, $167,250; C, $1,225,125; W, $387,000; X, $240,750; Y, $1,067,000; and Z, 562,100.

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.

Prepare any necessary December 31, 2017, adjusting entry to record the fair value adjustment for the long-term investments in available-for-sale securities.

Available-for-Sale Securities Cost Fair Value 80,000 shares of Company A common stock $ 1,038,600 $ 910,000 26,000 shares of Company B common stock 336,750 326,000 33,000 shares of Company C common stock 1,357,000 1,308,875

Explanation / Answer

The total long term investment available for sale at cost is $ 2,321,100 which consists of unusal equity accounts by $ (125,875) hence te securities will be reported at $2,195,225

Note 1 - Security A has been sold before 31-Dec and hence not considered for valuation at 31-Dec

Note 2 - As the ownership is more than 20% in case of security W and Y and hence they are to be consolidated sererately as associate and subsidary

B)

Fair Value Adjustment—AFS..........61,910

To Unrealized Loss—Equity....................... 61,910

C) Only gains or losses realized on the sale of available-for-sale securities appear on the income statement. Unrealized gains or losses appear in the equity section of the balance sheet.

Journal entry

Bank account Dr.............................1,186,975

Loss on sale of investment Dr..........20,000

To Investment..................................................... 1,206,975

Available for sale Securities Cost Fair value Gain / (loss) B       168,375       167,250 (1,125) C    1,357,000    1,225,125 (131,875) X       260,625       240,750 (19,875) Z       535,100       562,100 27,000 Total    2,321,100    2,195,225 (125,875)

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