a. Prepare the entry for (1) the sale of Spartan and (2) Wildcat common stock on June 1. Prior to recording the sale, update the investments to fair value. Eliminate the associated Fair Value Adjustment balances upon sale of the investments. b. Record the purchase of Gopher common stock on August 1. c. Prepare any adjusting entry needed on December 31 of the current year.
a. Prepare the entry for (1) the sale of Spartan and (2) Wildcat common stock on June 1. Prior to recording the sale, update the investments to fair value. Eliminate the associated Fair Value Adjustment balances upon sale of the investments. b. Record the purchase of Gopher common stock on August 1. c. Prepare any adjusting entry needed on December 31 of the current year.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:At December 31 of the prior year, the portfolio of investments in equity securities measured at FV-NI held by
Athletes Inc. was as follows.
Investment Security
Badger Common Stock
Spartan Common Stock
Wildcat Common Stock
Total
Fair
Value
$39,500
51,000
23,500
$115,000 $114,000
Shares Cost
1,000 $40,000
1,600 50,000
500 25,000
Unrealized Holding
Gain (Loss)
$-500
1,000
-1,500
$-1,000
In the current year on June 1, Athletes Inc. sold 400 shares of Spartan stock for $33 per share and 100 shares of
Wildcat stock for $55 per share. Athletes Inc. purchased 400 shares of Gopher common stock for $35 per share on
August 1. The fair value of the remaining stock held on December 31 is as follows: Badger common stock,
$42,000; Spartan common stock, $36,000; Wildcat common stock, $20,800; and Gopher common stock, $14,400.
a. Prepare the entry for (1) the sale of Spartan and (2) Wildcat common stock on June 1. Prior to recording the
sale, update the investments to fair value. Eliminate the associated Fair Value Adjustment balances upon sale of
the investments.
b. Record the purchase of Gopher common stock on August 1.
c. Prepare any adjusting entry needed on December 31 of the current year.
Transcribed Image Text:Date
(a1) June 1
(a2) June 1
(b) Aug. 1
(c) Dec. 31
Account Name
Unrealized Gain or Loss-Income
Fair Value Adjustment-TS
To adjust investments being sold to fair value.
Cash
Fair Value Adjustment-TS
Investment in TS
To record the sale of investments.
Fair Value Adjustment-TS
Gain on Sale of Investment
To record the purchase of investments.
Unrealized Gain or Loss-Income
Fair Value Adjustment-TS
To record year-end adjusting entry.
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Credit
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450 X
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