Twist Corp. had no short-term investments prior to year 2017. It had the following transactions involving short-term investments in available-for-sale securities during 2017. Apr. 16 Purchased 5,000 shares of Lafayette Co. stock at $26 per share.July 7 Purchased 3,500 shares of CVF Co. stock at $51 per share. 20 Purchased 1,600 shares of Green Co. stock at $18 per share.Aug. 15 Received an $1.20 per share cash dividend on the Lafayette Co. stock. 28 Sold 3,000 shares of Lafayette Co. stock at $29 per share.Oct. 1 Received a $3.30 per share cash dividend on the CVF Co. shares.Dec. 15 Received a $1.40 per share cash dividend on the remaining Lafayette Co. shares. 31 Received a $2.70 per share cash dividend on the CVF Co. shares. **Investment Portfolio Analysis for December 31**This educational material explores how to calculate the fair value of an investment portfolio and determine necessary year-end adjustments.**Year-End Fair Values Per Share:**- Lafayette Co.: $27.00- CVF Co.: $49.50- Green Co.: $15.00**Cost of Investments at December 31:**| Investment | # of Shares | Cost ||-----------------------------------------|-------------|-----------|| Lafayette Company Stock | 2,000 | $52,000 || CVF Co. Stock | 3,500 | $178,500 || Green Co. | 1,600 | $28,800 || **Total Cost** | | $259,300 |**Fair Value of Investments at December 31:**| Investment | # of Shares | Fair Value Per Share | Fair Value ||-----------------------------------------|-------------|----------------------|------------|| Lafayette Company Stock | 2,000 | $27.00 | $54,000 || CVF Co. Stock | 3,500 | $49.50 | $173,250 || Green Co. | 1,600 | $15.00 | $24,000 || **Total Fair Value** | | | $251,250 |**Total Unrealized Gain/Loss as of December 31:**- **$8,050****Steps for Year-End Adjustment:**1. **Determine Unadjusted Fair Value Balance:** - Current Total Cost: **$259,300**2. **Determine Adjusted Fair Value Balance:** - Total Fair Value: **$251,250**3. **Calculate Necessary Adjustment:** - Recognize a credit difference to adjust the fair value account to reflect the actual fair value.This summary assists in understanding the concept of investment valuation and fair value adjustments in accounting.

Fai Value adjustments account: The is contra account used for valuation of investment at fair value…

Answered: Twist Corp. had no short-term…

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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Twist Corp. had no short-term investments prior to year 2017. It had the following transactions involving short-term investments in available-for-sale securities during 2017.

Apr.	16	Purchased 5,000 shares of Lafayette Co. stock at $26 per share.
July	7	Purchased 3,500 shares of CVF Co. stock at $51 per share.
	20	Purchased 1,600 shares of Green Co. stock at $18 per share.
Aug.	15	Received an $1.20 per share cash dividend on the Lafayette Co. stock.
	28	Sold 3,000 shares of Lafayette Co. stock at $29 per share.
Oct.	1	Received a $3.30 per share cash dividend on the CVF Co. shares.
Dec.	15	Received a $1.40 per share cash dividend on the remaining Lafayette Co. shares.
	31	Received a $2.70 per share cash dividend on the CVF Co. shares.

**Investment Portfolio Analysis for December 31**

This educational material explores how to calculate the fair value of an investment portfolio and determine necessary year-end adjustments.

**Year-End Fair Values Per Share:**

- Lafayette Co.: $27.00
- CVF Co.: $49.50
- Green Co.: $15.00

**Cost of Investments at December 31:**

| Investment | # of Shares | Cost |
|-----------------------------------------|-------------|-----------|
| Lafayette Company Stock | 2,000 | $52,000 |
| CVF Co. Stock | 3,500 | $178,500 |
| Green Co. | 1,600 | $28,800 |
| **Total Cost** | | $259,300 |

**Fair Value of Investments at December 31:**

| Investment | # of Shares | Fair Value Per Share | Fair Value |
|-----------------------------------------|-------------|----------------------|------------|
| Lafayette Company Stock | 2,000 | $27.00 | $54,000 |
| CVF Co. Stock | 3,500 | $49.50 | $173,250 |
| Green Co. | 1,600 | $15.00 | $24,000 |
| **Total Fair Value** | | | $251,250 |

**Total Unrealized Gain/Loss as of December 31:**

- **$8,050**

**Steps for Year-End Adjustment:**

1. **Determine Unadjusted Fair Value Balance:**
- Current Total Cost: **$259,300**

2. **Determine Adjusted Fair Value Balance:**
- Total Fair Value: **$251,250**

3. **Calculate Necessary Adjustment:**
- Recognize a credit difference to adjust the fair value account to reflect the actual fair value.

This summary assists in understanding the concept of investment valuation and fair value adjustments in accounting.

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