AJMAN Company has the following securities in its investment portfolio on Decemb

Question

AJMAN Company has the following securities in its investment portfolio on December 31, 2014 (all securities were purchased in 2014) (1) 5,000 of Khor Co. stock which cost $81,590, (2) 3,000 of Dubai Ltd. stock which cost $152,780, and (3) 12,000 of Meer Company preferred stock which cost $560,000. The Fair Value Adjustment account shows a debit of $8,300 at the end of 2014 In 2015, AJMAN completed the following securities transactions. of Khor's stock at $18 per share less fees of $3,500. On June 6, purchased 9,000 of Seeb fees of $2,800. 2. stock at $21.70 per share plus 31, 2015, the market values per share of these securities . Dubai: $62.50, . Meer: . Seeb: $46.00 $23.00 the accounting supervisor of AJMAN told you that, even though intends to hold rties have readiy determinable fair values, A i not eterminable fair v actively trade these securities because the top them for more than one year. Calculate the gain or loss on the security sale on March 1 (b) Prepare (c) Prepare the journal entry to record the security purchase on June 6, 2015 7, 2015 (5 marks) (3 marks) (2 marks) the entry for the security sale on March 17, 2015. the unrealized gains or losses for AJMAN on December 31, 2015. (10 marks) (2 marks) (e) Prepare the adjusting entry for AJMAN on December 31, 2015. (1) How should the unrealized gains or losses of AJMAN's be reported? (3 marks) CASE ANALYSIS

Explanation / Answer

a. Realised loss on sale of Khor co. security = 250 (as done below) b. Mar 17,2015 Cash (18*5000)-3500 86500 Expense on sale 3500 Realised loss on sale of Khor Co. stock 250 Inv. In Khor Co. stock(AFS) 81950 Unrealised loss-Fair value adjustment 8300 c. Jun 6,2015 Inv.in Seeb stock(9000*21.70)+2800 198100 Cash 198100 d. Dubai Meer Seeb Value at Dec 31 2014 152780 560000 198100 Value at Dec 31, 2015 3000*62.50 187500 12000*46 552000 9000*23 207000 Unrealised gain(loss) -34720 8000 -8900 e. Unrealised loss on Dubai co. AFS 34720 Unrealised loss on Seeb co. AFS 8900 Meer co. AFS 8000 Unrealised gain-Meer co. AFS 8000 Dubai co.-AFS 34720 Seeb co. AFS 8900 f. Both Unrealised gain & (loss) should be reported under Other Comprehensive Income(OCI) under Stockholders' Equity---on the liability side of balance sheet.

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