Fair Value Journal Entries, Available-for-Sale Investments Lipscomb Inc. purchas
ID: 2576277 • Letter: F
Question
Fair Value Journal Entries, Available-for-Sale Investments
Lipscomb Inc. purchased a portfolio of available-for-sale securities in 2014, its first year of operations. The cost and fair value of this portfolio on December 31, 2014, was as follows:
On May 10, 2015, Lipscomb purchased 500 shares of Violet Inc. stock at $31 per share plus a $130 brokerage fee.
Provide the journal entries to record the following:
The adjustment of the available-for-sale security portfolio to fair value on December 31, 2014.
The May 10, 2015, purchase of Violet Inc. stock.
2014 Dec. 31
2015 May 10
Name Number of Shares Total Cost Total Fair Value Jasper, Inc. 1,200 $16,080 $17,850 Parker Corp. 700 22,960 25,030 Smithfield Corp. 350 10,850 10,310 Total $49,890 $53,190
Explanation / Answer
Journal Entries Date ACCT Title and explanation Debit Credit 2014, Dec - 31 Available For Sale Securities $3,300 To Unrealized Gain on available for sale securities $3,300 (To Adjustment for fair value of investment) ($ 53,190 - 49,890) 2015, May -10 Available For Sale Securities $15,630 To Cash Account $15,630 (Being shares of violet inc. is purchased) (500 Shares * $ 31 + $ 130)
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