Adjust FVA at Sale and Year-EndOn November 1, 2020, Drucker Co. acquired the following investments in equity securities measured at FV‑NI.Kelly Corporation—750 shares of common stock (no-par) at $60 per share. Keefe Corporation—450 shares preferred stock ($10 par) at $20 per share. On December 31, 2020, the company’s year-end, the quoted market prices were as follows: Kelly Corporation common stock, $52, and Keefe Corporation preferred stock, $24. Following are the data for 2021.Mar. 2, 2021 Dividends per share, declared and paid: Kelly Corp., $1, and Keefe Corp., $0.50.Oct. 1, 2021 Sold 150 shares of Keefe Corporation preferred stock at $25 per share.Dec. 31, 2021 Fair values: Kelly common, $46 per share, Keefe preferred, $26 per share. Journal Entries and Financial Statement Presentation for 2020Journal Entries and Financial Statement Presentation for 2021a. Prepare the entry for Drucker Company to record the purchase of the securities.DateAccount NameDr.Cr.Nov. 1, 2020b. Prepare any adjusting entry needed at December 31, 2020.DateAccount NameDr.Cr.Dec. 31, 2020 Unrealized Gain or Loss--IncomeFair Value Adjustment--Equity Securitiesc. Indicate the items and amounts that should be reported on the 2020 income statement of Druckerand its year-end balance sheet. Assume that the investments are classified as current.Note: Use a negative sign to indicate a loss.Income Statement2020Other Revenues and GainsNet gain (loss) on equity securities $Balance Sheet, December 312020AssetsInvestment in equity securities $ Journal Entries and Financial Statement Presentation for 2020Journal Entries and Financial Statement Presentation for 2021d. Prepare the entries required in 2021 to record dividend revenue, the sale of stock, and the fair value adjustment. Update the Fair Value Adjustment account prior to recording any sale. Eliminate the associated Fair Value Adjustment account uNote: List multiple debits or credits (when applicable) in alphabetical order.DateAccount NameDr.Cr.Mar. 2, 2021Oct. 1, 2021To adjust to fair value, investment to be sold.Oct. 1, 2021To record sale of securitiesDec. 31, 2021e. Indicate items and amounts that should be reported on the 2021 income statement and year-end balance sheet.Note: Use a negative sign to indicate a loss.Income Statement2021Other Revenues and GainsDividend revenue2$Net gain (loss) on equity securities $Balance Sheet, December 312021AssetsInvestment in equity securities $Please answer all parts of the question.o o o oo o oo oo oo o

Answer a: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the…

Answered: Adjust FVA at Sale and Year-End On…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

100%

Adjust FVA at Sale and Year-End

On November 1, 2020, Drucker Co. acquired the following investments in equity securities measured at FV‑NI.

Kelly Corporation—750 shares of common stock (no-par) at $60 per share. Keefe Corporation—450 shares preferred stock ($10 par) at $20 per share. On December 31, 2020, the company’s year-end, the quoted market prices were as follows: Kelly Corporation common stock, $52, and Keefe Corporation preferred stock, $24. Following are the data for 2021.

Mar. 2, 2021 Dividends per share, declared and paid: Kelly Corp., $1, and Keefe Corp., $0.50.
Oct. 1, 2021 Sold 150 shares of Keefe Corporation preferred stock at $25 per share.
Dec. 31, 2021 Fair values: Kelly common, $46 per share, Keefe preferred, $26 per share.

Journal Entries and Financial Statement Presentation for 2020
Journal Entries and Financial Statement Presentation for 2021
a. Prepare the entry for Drucker Company to record the purchase of the securities.
Date
Account Name
Dr.
Cr.
Nov. 1, 2020
b. Prepare any adjusting entry needed at December 31, 2020.
Date
Account Name
Dr.
Cr.
Dec. 31, 2020 Unrealized Gain or Loss--Income
Fair Value Adjustment--Equity Securities
c. Indicate the items and amounts that should be reported on the 2020 income statement of Drucker
and its year-end balance sheet. Assume that the investments are classified as current.
Note: Use a negative sign to indicate a loss.
Income Statement
2020
Other Revenues and Gains
Net gain (loss) on equity securities $
Balance Sheet, December 31
2020
Assets
Investment in equity securities $

Journal Entries and Financial Statement Presentation for 2020
Journal Entries and Financial Statement Presentation for 2021
d. Prepare the entries required in 2021 to record dividend revenue, the sale of stock, and the fair value adjustment. Update the Fair Value Adjustment account prior to recording any sale. Eliminate the associated Fair Value Adjustment account u
Note: List multiple debits or credits (when applicable) in alphabetical order.
Date
Account Name
Dr.
Cr.
Mar. 2, 2021
Oct. 1, 2021
To adjust to fair value, investment to be sold.
Oct. 1, 2021
To record sale of securities
Dec. 31, 2021
e. Indicate items and amounts that should be reported on the 2021 income statement and year-end balance sheet.
Note: Use a negative sign to indicate a loss.
Income Statement
2021
Other Revenues and Gains
Dividend revenue
2$
Net gain (loss) on equity securities $
Balance Sheet, December 31
2021
Assets
Investment in equity securities $
Please answer all parts of the question.
o o o o
o o o
o o
o o
o o

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 3 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions