#4 PLEASE ANSWER PARTS D) and E)Recording and Reporting Equity Investment: FV-NIAdjust 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 2020**---**a.** Prepare the entry for Drucker Company to record the purchase of the securities.| Date | Account Name | Dr. | Cr. ||------------|--------------------------|-------|-------|| Nov. 1, 2020 | Investment in Stock | 54000 | 0 || | Cash | 0 | 54000 |---**b.** Prepare any adjusting entry needed at December 31, 2020.| Date | Account Name | Dr. | Cr. ||------------|-----------------------------------|------|------|| Dec. 31, 2020 | Unrealized Gain or Loss--Income | 4200 | 0 || | Fair Value Adjustment--Equity Securities | 0 | 4200 |---**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 | $ | -4200 || **Balance Sheet, December 31** | **2020** | ||--------------------------------|----------|------|| Assets | | || Investment in equity securities | $ | 49800 |---**Please answer all parts of the question.** **Journal Entries for Fair Value and Securities Transactions****Instruction:**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 upon sale.**Note:** List multiple debits or credits (when applicable) in alphabetical order.| Date | Account Name | Dr. | Cr. ||---------------|--------------------------------------------|-----|-----|| Mar. 2, 2021 | | 0 | 0 || Oct. 1, 2021 | | 0 | 0 || | To adjust to fair value, investment to be sold.| 0 | 0 || Oct. 1, 2021 | | 0 | 0 || | To record sale of securities | 0 | 0 || Dec. 31, 2021 | | 0 | 0 |**Income Statement (2021)**| Category | Amount ||----------------------------|---------|| Other Revenues and Gains | $0 || Dividend revenue | $0 || Net gain (loss) on equity securities | $0 |**Balance Sheet, December 31 (2021)**| Assets | Amount ||--------------------------------|---------|| Investment in equity securities| $0 |**Note:** Use a negative sign to indicate a loss.---**Prompt:** Please answer all parts of the question.

Equity Investment is defined as the financial instrument tool which is available with the investor…

Answered: PLEASE ANSWER PARTS D) and E)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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#4 PLEASE ANSWER PARTS D) and E)

Recording and Reporting Equity Investment: FV-NI

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**

---

**a.** Prepare the entry for Drucker Company to record the purchase of the securities.

| Date | Account Name | Dr. | Cr. |
|------------|--------------------------|-------|-------|
| Nov. 1, 2020 | Investment in Stock | 54000 | 0 |
| | Cash | 0 | 54000 |

---

**b.** Prepare any adjusting entry needed at December 31, 2020.

| Date | Account Name | Dr. | Cr. |
|------------|-----------------------------------|------|------|
| Dec. 31, 2020 | Unrealized Gain or Loss--Income | 4200 | 0 |
| | Fair Value Adjustment--Equity Securities | 0 | 4200 |

---

**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 | $ | -4200 |

| **Balance Sheet, December 31** | **2020** | |
|--------------------------------|----------|------|
| Assets | | |
| Investment in equity securities | $ | 49800 |

---

**Please answer all parts of the question.**

**Journal Entries for Fair Value and Securities Transactions**

**Instruction:**
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 upon sale.

**Note:** List multiple debits or credits (when applicable) in alphabetical order.

| Date | Account Name | Dr. | Cr. |
|---------------|--------------------------------------------|-----|-----|
| Mar. 2, 2021 | | 0 | 0 |
| Oct. 1, 2021 | | 0 | 0 |
| | To adjust to fair value, investment to be sold.| 0 | 0 |
| Oct. 1, 2021 | | 0 | 0 |
| | To record sale of securities | 0 | 0 |
| Dec. 31, 2021 | | 0 | 0 |

**Income Statement (2021)**

| Category | Amount |
|----------------------------|---------|
| Other Revenues and Gains | $0 |
| Dividend revenue | $0 |
| Net gain (loss) on equity securities | $0 |

**Balance Sheet, December 31 (2021)**

| Assets | Amount |
|--------------------------------|---------|
| Investment in equity securities| $0 |

**Note:** Use a negative sign to indicate a loss.

---

**Prompt:** Please answer all parts of the question.

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