Problem 15-3A Debt investments in available-for-sale securities; unrealized and realized gains and losses LO P3Skip to question [The following information applies to the questions displayed below.] Stoll Co.'s long-term available-for-sale portfolio at the start of this year consists of the following. Available-for-Sale SecuritiesCostFair ValueCompany A bonds$533,600 $492,000 Company B notes 159,310 150,000 Company C bonds 661,900 641,950 Stoll enters into the following transactions involving its available-for-sale debt securities this year. Jan. 29 Sold one-half of the Company B notes for $78,430.July 6 Purchased bonds of Company X for $120,800.Nov. 13 Purchased notes of Company Z for $267,100.Dec. 9 Sold all of the bonds of Company A for $524,100.The fair values at December 31 are B, $82,500; C, $609,100; X, $118,000; and Z, $279,000. **Fair Value Adjustment Computation - Available-for-Sale Securities**| **December 31 AFS Securities** | **Cost** | **Fair Value** | **Unrealized Amount** | **Gain or Loss?** ||--------------------------------|---------|------------|-----------------|-----------------|| Company B notes | $79,655 | | | || Company C bonds | $661,900 | $609,100 | | || Company X bonds | $120,800 | $118,000 | | || Company Z notes | $267,100 | | | || **Total** | **$1,129,455** | **$727,100** | **$3** | **Loss** |**Further Details:**- **Required 2 December 31 Balance in the Fair Value Adjustment account**: (Credit) - **Balance at beginning of year in the Fair Value Adjustment account**: $70,860 (Credit)- **December 31 required adjustment to the Fair Value Adjustment account**: (Debit)**Summary Section:**- **Balance at beginning of year**: $70,860This table is used to compute the fair value adjustment for available-for-sale securities. It includes details about the cost, fair value, unrealized amounts, and gain or loss associated with each security. Adjustments are calculated to align the fair value with the market value at the year-end, impacting the Fair Value Adjustment account. **Problem 15-3A Debt investments in available-for-sale securities; unrealized and realized gains and losses****LO P3***The following information applies to the questions displayed below.*Stoll Co.'s long-term available-for-sale portfolio at the start of this year consists of the following:| Available-for-Sale Securities | Cost | Fair Value ||-------------------------------|--------|------------|| Company A bonds | $533,600 | $492,000 || Company B notes | $159,310 | $150,000 || Company C bonds | $661,900 | $641,950 |Stoll enters into the following transactions involving its available-for-sale debt securities this year.- **Jan. 29** Sold one-half of the Company B notes for $78,430.- **July 6** Purchased bonds of Company X for $120,800.- **Nov. 13** Purchased notes of Company Z for $267,100.- **Dec. 9** Sold all of the bonds of Company A for $524,100.The fair values at December 31 are B, $82,500; C, $609,100; X, $118,000; and Z, $279,000.**Problem 15-3A Part 1 and 2****Required:**1. Prepare journal entries to record these transactions, including the December 31 adjusting entry to record the fair value adjustment for the long-term investments in available-for-sale securities.2. Determine the amount Stoll reports on its December 31 balance sheet for its long-term investments in available-for-sale securities.

The loss and gain is recognized on investment on the basis of fair value of investments.Part a. JOURNAL S.no Particulars Debit Credit Jan 29 Cash 78,430 Company B notes 75,000 Gain sale of company B notes 3,430 (To record sale of B notes) July 6 Company X Bonds- AFS 120,800 Cash 120,800 (To record purchase of bonds) Nov 13 Company Z bonds AFS 267,100 Cash 267,100 (To record purchase of Z bonds) Dec 9 Cash 524,100 Company A notes 492,000 Gain on sale of company B notes 32,100 (To record sale of company B notes) Dec 31 Fair value adjustment 16,250 Unrealized loss- AFS 16,250 (To record adjustment entry) Calculations: a. Company B notes (82,500 – 75,000) 7,500 Unrealized gain on Company B notes 7,500 (To record unrealized gain on company B notes) b. Unrealized loss on Company C bonds (641,950 – 609,100) 32,850 Company C bonds 32,850 (To record unrealized loss on Company c bonds) c. Unrealized loss on company X bonds 2,800 Company X bonds 2,800 (To record unrealized loss on company x bonds) d. Company Z notes 11,900 Unrealized gain on company Z notes 11,900 (To record unrealized gain on company Z notes) Part b. Balance sheet Values Fair values Company B notes $82,500 Company C Bonds $609,100 Company X bonds $118,000 Company Z bonds $279,000

Answered: Problem 15-3A Debt investments in…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Problem 15-3A Debt investments in available-for-sale securities; unrealized and realized gains and losses LO P3

Skip to question

[The following information applies to the questions displayed below.]

Stoll Co.'s long-term available-for-sale portfolio at the start of this year consists of the following.

Available-for-Sale Securities	Cost	Fair Value
Company A bonds	$	533,600	$	492,000
Company B notes		159,310		150,000
Company C bonds		661,900		641,950

Stoll enters into the following transactions involving its available-for-sale debt securities this year.

Jan.	29	Sold one-half of the Company B notes for $78,430.
July	6	Purchased bonds of Company X for $120,800.
Nov.	13	Purchased notes of Company Z for $267,100.
Dec.	9	Sold all of the bonds of Company A for $524,100.

The fair values at December 31 are B, $82,500; C, $609,100; X, $118,000; and Z, $279,000.

**Fair Value Adjustment Computation - Available-for-Sale Securities**

| **December 31 AFS Securities** | **Cost** | **Fair Value** | **Unrealized Amount** | **Gain or Loss?** |
|--------------------------------|---------|------------|-----------------|-----------------|
| Company B notes | $79,655 | | | |
| Company C bonds | $661,900 | $609,100 | | |
| Company X bonds | $120,800 | $118,000 | | |
| Company Z notes | $267,100 | | | |
| **Total** | **$1,129,455** | **$727,100** | **$3** | **Loss** |

**Further Details:**

- **Required 2 December 31 Balance in the Fair Value Adjustment account**: (Credit)

- **Balance at beginning of year in the Fair Value Adjustment account**: $70,860 (Credit)

- **December 31 required adjustment to the Fair Value Adjustment account**: (Debit)

**Summary Section:**

- **Balance at beginning of year**: $70,860

This table is used to compute the fair value adjustment for available-for-sale securities. It includes details about the cost, fair value, unrealized amounts, and gain or loss associated with each security. Adjustments are calculated to align the fair value with the market value at the year-end, impacting the Fair Value Adjustment account.

**Problem 15-3A Debt investments in available-for-sale securities; unrealized and realized gains and losses**
**LO P3**

*The following information applies to the questions displayed below.*

Stoll Co.'s long-term available-for-sale portfolio at the start of this year consists of the following:

| Available-for-Sale Securities | Cost | Fair Value |
|-------------------------------|--------|------------|
| Company A bonds | $533,600 | $492,000 |
| Company B notes | $159,310 | $150,000 |
| Company C bonds | $661,900 | $641,950 |

Stoll enters into the following transactions involving its available-for-sale debt securities this year.

- **Jan. 29** Sold one-half of the Company B notes for $78,430.
- **July 6** Purchased bonds of Company X for $120,800.
- **Nov. 13** Purchased notes of Company Z for $267,100.
- **Dec. 9** Sold all of the bonds of Company A for $524,100.

The fair values at December 31 are B, $82,500; C, $609,100; X, $118,000; and Z, $279,000.

**Problem 15-3A Part 1 and 2**

**Required:**

1. Prepare journal entries to record these transactions, including the December 31 adjusting entry to record the fair value adjustment for the long-term investments in available-for-sale securities.

2. Determine the amount Stoll reports on its December 31 balance sheet for its long-term investments in available-for-sale securities.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

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.