a. Compute the amount of net income or net loss that Lilly should report for 2021, taking into consideration Lilly's security transactions for 2021. b. Prepare the journal entry to record unrealized gain or loss related to the investment in Arroyo Company stock at December 31, 2021.
a. Compute the amount of net income or net loss that Lilly should report for 2021, taking into consideration Lilly's security transactions for 2021. b. Prepare the journal entry to record unrealized gain or loss related to the investment in Arroyo Company stock at December 31, 2021.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Presented below is information related to the purchases of common stock by Lilly Company during 2020.
|
Cost
(at purchase date)
|
Fair Value
(at December 31)
|
Investment in Arroyo Company stock
|
$100,000
|
$ 80,000
|
Investment in Lee Corporation stock
|
250,000
|
300,000
|
Investment in Woods Inc. stock
|
180,000
|
190,000
|
Total
|
$530,000
|
$570,000
|
In addition, assume that the investment in the Woods Inc. stock was sold during 2021 for $195,000. At December 31, 2021, the following information relates to its two remaining investments of common stock.
Net income before any security gains and losses for 2021 was $905,000.
|
Cost
(at purchase date)
|
Fair Value
(at December 31)
|
Investment in Arroyo Company stock
|
$100,000
|
$140,000
|
Investment in Lee Corporation stock
|
250,000
|
310,000
|
Total
|
$350,000
|
$450,000
|
Instructions
a.
Compute the amount of net income or net loss that Lilly should report for 2021, taking into consideration Lilly's security transactions for 2021.
b.
Prepare the journal entry to record unrealized gain or loss related to the investment in Arroyo Company stock at December 31, 2021.
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