WORKING PAPERS F/ FUND ACCOUNTING
22nd Edition
ISBN: 9781308868394
Author: Wild
Publisher: MCG CUSTOM
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Question
Chapter 15, Problem 3BPSB
To determine
Expert Solution & Answer
Answer to Problem 3BPSB
Explanation of Solution
Introduction:
Available-for-sale (AFS) securities are securities/shares which are purchased to earn dividend, interest or to increase fair market value. When these securities are sold in the short term, then they become short term investments else they are considered as long term investments.
To determine:
1.
2. A table summarizing (a) total cost, (b) total fair value adjustment and (c) total fair Value.
3. A table summarizing (A) the realized gains and losses, (b) the unrealized gains or losses
Solution:
1. The required journal
2. The calculation is shown in the explanation section.
3. The calculation is shown in the explanation section
Explanation:
1. The required journal entries and adjustment entries are as follows:
Entries to record purchase of shares:
| Date | Particulars | Debit($) | Credit($) |
| 10.03.2015 | Long term investment (A) | 31400 | |
| Cash (To record shares purchased) | 31400 | ||
| 07.04.2015 | Long term investment- F Company | 57283 | |
| Cash (To record shares purchased) | 57283 | ||
| 01.09.2015 | Long term investments (M company) | 29090 | |
| Cash (To record shares purchased) | 29090 | ||
| 02.06.2016 | Long term investments- D company | 35700 | |
| Cash (Purchase of shares) | 35700 | ||
| 14.06.2016 | Long term investments (S company) | 25480 | |
| Cash (Purchase of shares) | 25480 | ||
| 28.01.2016 | Long term investment-C company | 41480 | |
| Cash (Purchase of shares) | 41480 | ||
| 03.09.2016 | Long term investments-(M Company) | 84780 | |
| Cash (Purchase of shares) | 84780 |
Working notes:
Calculation of Purchases: We use the formula mentioned below:
| Date | Number of Shares | Price per unit | Commission | Purchases |
| 10.03.2015 | 1200 | $25.50 | $800 | $31400 |
| 07.04.2015 | 2500 | $22.50 | $1033 | $57283 |
| 01.09.2015 | 600 | $47 | $890 | $29090 |
| 02.06.2016 | 1800 | $19.25 | $1050 | $35700 |
| 14.06.2016 | 1200 | $21 | $280 | $25480 |
| 28.01.2016 | 1000 | $40 | $1480 | $41480 |
| 03.09.2016 | 3000 | $28 | $780 | $84780 |
The Fair Value adjustment entry is as follows:
| Date | Particulars | Debit($) | Credit($) |
| 31.12.2015 | Unrealized loss −(Equity) | 2873 | |
| Fair Value adjustment-AFS(LT) | 2873 | ||
| 31.12.2016 | Fair Value Adjustment-AFS(LT) | 5093 | |
| Unrealized Loss-Equity | 2873 | ||
| Unrealized Gain-Equity | 2220 | ||
| 31.12.2017 | Unrealized Gain-Equity | 2220 | |
| Unrealized Loss-Equity | 6260 | ||
| Fair Value Adjustment −AFS(LT) | 8480 |
Calculation of cost and fair value:
| Details | Cost | FV |
| A | $31400 | 33000(1200*$27.50) |
| F | 57283 | 52500(2500*$21) |
| P | 29090 | 29400(600*$49) |
| Total | 117773 | 114900 |
FV Adjustment = Cost- Value
Calculation of cost and fair value:
| Details | Cost | FV |
| A | 31400 | 34800(1200*$29) |
| D | 35700 | 32400(1800*$18) |
| S | 25480 | 27600(1200*$23) |
| Total | 92580 | 94800 |
Calculation of cost and fair value:
| C | 41480 | 48000(1000*$48) |
| M | 84780 | 72000(3000*$24) |
| Total | 126260 | 120000 |
FV Adjustment = Cost- Value
Calculation of required balance:
FV adjustment= Required balance+ unadjusted balance
Entries to record the sale of shares:
| Date | Particulars | Debit($) | Credit($) |
| 15.04.2016 | Cash | 50043 | |
| Loss on sale of Short term investment | 7240 | ||
| Long term investments(J&J) | 57283 | ||
| 27.11.2016 | Cash | 29755 | |
| Gain on sale of investments | 29090 | ||
| Long term investments | 655 | ||
| 22.08.2016 | Cash | 23950 | |
| Loss on sale of investments | 7450 | ||
| Long term investments − S Company | 31400 | ||
| 09.10.2016 | Cash | 28201 | |
| Loss on sale of investments | 2721 | ||
| Long term investments-AFS Company | 25480 | ||
| 31.10.2016 | Cash | 26102 | |
| Gain on sale of investments | 9598 | ||
| Long term investment-E Company | 35700 | ||
Calculation of Sales received from shares:
We use the formula mentioned below:
| Date | Number of Shares | Price/unit | Commission | Sales |
| 15.04.2016 | 2500 | $20.50 | $1207 | $50043 |
| 22.08.2016 | 1200 | $21.50 | $1850 | $23950 |
| 09.10.2016 | 1200 | $24 | $599 | $28201 |
| 31.10.2016 | 1800 | $15 | $898 | $26102 |
2. The following table summarizes cost; fair value adjustment and fair value of portfolio on long term AFS at the end of given three years:
| Particulars | 31.12.2015 ($) | 31.12.2016($) | 31.12.2017($) |
| Long term AFS securities (Cost) | 117773 | 92580 | 126260 |
| Less: Fair Value adjustment | (2873) | 2220 | (6260) |
| Long term AFS securities (Fair Value) | 114900 | 94800 | 120000 |
3. Statement showing realized and unrealized gains or loss at the end of given three years:
| Particulars | 2015($) | 2016($) | 2017($) |
| Realized Gains(Losses) | |||
| Sales of F Shares | (7240) | ||
| Sale of P shares | 665 | ||
| Sale of D shares | (9598) | ||
| Sale of A Shares | (7450) | ||
| Sale of S shares | 2721 | ||
| Total realized Gain(Loss) | 0 | (6575) | 14327 |
| Unrealized gain(Loss) | (2873) | 2220 | (6260) |
The unrealized gain is equal to the fair value adjustment.
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Chapter 15 Solutions
WORKING PAPERS F/ FUND ACCOUNTING
Ch. 15 - Prob. 1DQCh. 15 - Prob. 2DQCh. 15 - Prob. 3DQCh. 15 - Prob. 4DQCh. 15 - Prob. 5DQCh. 15 - Prob. 6DQCh. 15 - Prob. 7DQCh. 15 - Prob. 8DQCh. 15 - Prob. 9DQCh. 15 - Prob. 10DQ
Ch. 15 - Prob. 11DQCh. 15 - Prob. 12DQCh. 15 - Prob. 13DQCh. 15 - Prob. 14DQCh. 15 - Prob. 15DQCh. 15 - Prob. 16DQCh. 15 - Prob. 17DQCh. 15 - Prob. 1QSCh. 15 - Prob. 2QSCh. 15 - Prob. 3QSCh. 15 - Prob. 4QSCh. 15 - Prob. 5QSCh. 15 - Prob. 6QSCh. 15 - Prob. 7QSCh. 15 - Prob. 8QSCh. 15 - Prob. 9QSCh. 15 - Prob. 10QSCh. 15 - Prob. 11QSCh. 15 - Prob. 12QSCh. 15 - Prob. 13QSCh. 15 - Prob. 14QSCh. 15 - Prob. 15QSCh. 15 - Prob. 16QSCh. 15 - Prob. 17QSCh. 15 - Prob. 18QSCh. 15 - Exercise 15-1 Debt and equity securities and shod-...Ch. 15 - Prob. 2ECh. 15 - Brooks Co. purchases various investments in...Ch. 15 - Prob. 4ECh. 15 - Prob. 5ECh. 15 - Prob. 6ECh. 15 - Prob. 7ECh. 15 - Prob. 8ECh. 15 - Prob. 9ECh. 15 - Prob. 10ECh. 15 - Prob. 11ECh. 15 - Prob. 12ECh. 15 - Prob. 13ECh. 15 - Prob. 14ECh. 15 - Prob. 15ECh. 15 - Prob. 16ECh. 15 - Prob. 17ECh. 15 - Prob. 1APSACh. 15 - Prob. 2APSACh. 15 - Prob. 3APSACh. 15 - Prob. 4APSACh. 15 - Prob. 5APSACh. 15 - Prob. 6APSACh. 15 - Prob. 1BPSBCh. 15 - Prob. 2BPSBCh. 15 - Prob. 3BPSBCh. 15 - Prob. 4BPSBCh. 15 - Prob. 5BPSBCh. 15 - Prob. 6BPSBCh. 15 - Prob. 15SPCh. 15 - Prob. 1GLPCh. 15 - Prob. 2GLPCh. 15 - Prob. 1BTNCh. 15 - Prob. 2BTNCh. 15 - Kasey Hartman is the controller for Wholemart...Ch. 15 - Prob. 4BTNCh. 15 - Prob. 5BTNCh. 15 - Prob. 6BTNCh. 15 - Prob. 7BTNCh. 15 - Prob. 8BTNCh. 15 - Prob. 9BTN
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