
1.
To prepare:
1.

Explanation of Solution
For the year 2017,
To record purchase of 1,000 shares of J company at $20.50 per share plus $240 as commission
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
Jan 20, 2017 | Long term investment Trading securities | 20,740 | ||
Cash | 20,740 | |||
(Being long term investment purchase against cash) |
Table(1)
- The long term investment of G Company is increase. The long term investment is the asset of the company and the current asset of G Company also increases.
- The cash account is decrease by $20,740, and the credit of cash means that the current asset of the company also decreases.
To record purchase of 1,200 shares of SCompany at $46.20 per share plus $225 as commission
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
Feb 09, 2017 | Long term investment Trading securities | 55,665 | ||
Cash | 55,665 | |||
(Being long term investment purchase against cash) |
Table(2)
- The long term investment of G Company is increase. The long term investment is the asset of the company and the current asset of G Company also increases.
- The cash account is decrease by $55,665, and the credit of cash means that the current asset of the company also decreases.
To record purchase of 1,500 shares of MCompany at $27 per share plus $195 as commission
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
June 12, 2017 | Long term investment Trading securities | 40,695 | ||
Cash | 40,695 | |||
(Being long term investment purchase against cash) |
Table(3)
- The long term investment of G Company is increase. The long term investment is the asset of the company and the current asset of G Company also increases.
- The cash account is decrease by $40,695, and the credit of cash means that the current asset of the company also decreases.
To record the unrealized gain occurs on December 31, 2017.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
December 31, 2017 | Fair value adjustment long term investment | 11,228 | ||
Unrealized gain | 11,228 | |||
(Being unrealized gainearned of $11,228 at the time of closing) |
Table(4)
- The fair value adjustment account is an adjustment account to account for the unrealized gain earn by G Company.
- The fair value of long term investment is less than the cost of share so the G Company earn an unrealized gain of $11,228, and unrealized gainincreases the balance of income.
For the year 2018,
To record sale of 1,000 share of J Company at $23.50 and commission is $525.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
April 15 2018 | Cash | 23,248 | ||
Gain on sale of long term investment | 2,508 | |||
Long term investment | 20,740 | |||
(Being long term investment sold at a gain of $1,990 and receive cash ) |
Table(5)
- Cash receive at the time of sale of investment it increases the cash balance and the asset of the company also increases.
- By the sale of long term investment, the long term investment account decreases and the asset of the company also decreases with $20,740 amount.
- At the time of sale G Company receives the gain on sale of investment and this gain is credited to the gain on sale of long term investment account.
To record sale of 1,500 share of M Company at $23.90 and commission is $235.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
July. 5 2018 | Cash | 35,615 | ||
Loss on sale of long term investment | 5,080 | |||
Long term investment | 40,695 | |||
(Being long term investment sold at a loss of $599 and receive cash ) |
Table(6)
- Cash receive at the time of sale of investment it increases the cash balance and the asset of the company also increases.
- By the sale of long term investment, the long term investment account decreases and the asset of the company also decreases with $40,695 amount.
- At the time of sale C Company suffer a loss on sale of investment and this loss is debited to the loss on sale of long term investment account.
To record purchase of 600 shares of S.L at $22.50 per share plus $480 as commission
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
June 22, 2018 | Long term investment Trading securities | 13,980 | ||
Cash | 13,980 | |||
(Being long term investment purchase against cash) |
Table(7)
- The long term investment of G Company is increase. The long term investment is the asset of the company and the current asset of G Company also increases.
- The cash account is decrease by $13,980, and the credit of cash means that the current asset of the company also decreases.
To record purchase of 900 shares of E.K at $17 per share plus $198 as commission
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
August 19,2018 | Long term investment Trading securities | 15,498 | ||
Cash | 15,498 | |||
(Being long term investment purchase against cash) |
Table(8)
- The long term investment of G Company is increase. The long term investment is the asset of the company and the current asset of G Company also increases.
- The cash account is decrease by $15,498, and the credit of cash means that the current asset of the company also decreases.
To record the unrealized gain occurs on December 31, 2018.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
December 31, 2018 | Fair value adjustment long term investment | 21,396 | ||
Unrealized gain | 21,396 | |||
(Being unrealized gain earned of at the time of closing) |
Table(9)
- The fair value adjustment account is an adjustment account to account for the unrealized gain earn by G Company.
- The fair value of long term investment is less than the cost of share so the G Company earn an unrealized gain of $21,396, and unrealized gain increases the balance of income.
For the year 2019,
To record purchase of 2,400 shares of Mi at $67 per share plus $525 as commission
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
Feb. 27, 2019 | Long term investment Trading securities | 161,325 | ||
Cash | 161,325 | |||
(Being long term investment purchase against cash) |
Table(10)
- The long term investment of G Company is increase. The long term investment is the asset of the company and the current asset of G Company also increases.
- The cash account is decrease by $161,325, and the credit of cash means that the current asset of the company also decreases.
To record sale of 1,200 share of S Company at $48 and commission is $880.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
June 21 2019 | Cash | 56,720 | ||
Gain on sale of long term investment | 1,055 | |||
Long term investment | 55,665 | |||
(Being long term investment sold at a gain of $1,055 and receive cash ) |
Table(11)
- Cash receive at the time of sale of investment it increases the cash balance and the asset of the company also increases.
- By the sale of long term investment, the long term investment account decreases and the asset of the company also decreases with $55,665 amount.
- At the time of sale G Company receives the gain on sale of investment and this gain is credited to the gain on sale of long term investment account.
To record purchase of 1,400 shares of B&D at $36 per share plus $4355 as commission
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
June.30, 2019 | Long term investment Trading securities | 50,835 | ||
Cash | 50,835 | |||
(Being long term investment purchase against cash) |
Table(12)
- The long term investment of G Company is increase. The long term investment is the asset of the company and the current asset of G Company also increases.
- The cash account is decrease by $50,835, and the credit of cash means that the current asset of the company also decreases.
To record sale of 600 share of S.L Company at $16.25 and commission is $435.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
August 3, 2019 | Cash | 9,315 | ||
Loss on sale of long term investment | 4,665 | |||
Long term investment | 13,980 | |||
(Being long term investment sold at a loss of $4,665 and receive cash ) |
Table(13)
- Cash receive at the time of sale of investment it increases the cash balance and the asset of the company also increases.
- By the sale of long term investment, the long term investment account decreases and the asset of the company also decreases with $13,980 amount.
- At the time of sale C Company suffer a loss on sale of investment and this loss is debited to the loss on sale of long term investment account.
To record sale of 900 share of E.K at $22.75 and commission is $625.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
June 21 2019 | Cash | 19,850 | ||
Gain on sale of long term investment | 4,352 | |||
Long term investment | 15,498 | |||
(Being long term investment sold at a gain of $4,352 and receive cash ) |
Table(14)
- Cash receive at the time of sale of investment it increases the cash balance and the asset of the company also increases.
- By the sale of long term investment, the long term investment account decreases and the asset of the company also decreases with $55,665 amount.
- At the time of sale G Company receives the gain on sale of investment and this gain is credited to the gain on sale of long term investment account.
To record the unrealized loss occurs on December 31, 2019.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
December 31, 2019 | Unrealized loss- Income | 462 | ||
Fair value adjustment Short term investment | 462 | |||
(Being unrealized loss suffered of $462 at the time of closing) |
Table(15)
- The fair value of short term investment is $220,200 and the cost of share is $ 219,738 so the G Company suffers an unrealized loss of $462, and unrealized loss reduces the balance of equity account.
- The fair value adjustment account is an adjustment account to account for the unrealized loss suffers by G Company.
Working Notes:
Calculation of the value of purchase price of shares of J Company,
Calculation of the value of purchase price of shares of S Company,
Calculation of the value of purchase price of shares ofM Company,
Calculation of fair value adjustment as on December 31, 2017,
Calculation of sale price of shares of J Company,
Calculation of Gain in the sale of investment of J Company,
Calculation of sale price of shares of J Company,
Calculation of loss in the sale of investment of H Company,
Calculation of the value of purchase price of shares of S.L Company,
Calculation of the value of purchase price of shares of E.K Company,
Calculation of fair value adjustment as on December 31, 2018,
Calculation of the value of purchase price of shares of Mi Company,
Calculation of sale price of shares of S Company,
Calculation of Gain in the sale of investment of S Company,
Calculation of the value of purchase price of shares of B&D Company,
Calculation of sale price of shares of S.L Company,
Calculation of loss in the sale of investment of S.L Company,
Calculation of sale price of shares of E.K Company,
Calculation of Gain in the sale of investment of E.K Company,
Calculation of fair value adjustment as on December 31, 2019,
2.
(a)
To prepare: A table that shows the cost of security in each year.
2.
(a)

Explanation of Solution
A table that shows cost of security is,
Year | Company | Cost of security ($) |
2017 | J | 20,740 |
S | 55,665 | |
M | 40,695 | |
2018 | S.L | 13,980 |
E.K | 15,498 | |
S | 55,665 | |
2019 | Mi | 161,325 |
B&D | 50,835 | |
Table(16)
(b)
To prepare: A table that shows the fair value of security in each year.
(b)

Explanation of Solution
A table that shows fair value of security is,
Year | Company | Fair Value ($) |
2017 | J | 21,500 |
S | 45,600 | |
M | 46,350 | |
2018 | S.L | 12,000 |
E.K | 17,325 | |
S | 42,000 | |
2019 | Mi | 165,600 |
B&D | 54,600 | |
Table(17)
(c)
To prepare: A table that shows the total fair value portfolio of security in each year.
(c)

Explanation of Solution
A table shows total fair value portfolio of security,
Year | Cost Value ($) (A) | Fair Value ($) (B) | Fair Value Adjustment ($) |
2017 | 124,678 | 113,450 | 11,228 |
2018 | 92,721 | 71,325 | 21,396 |
2019 | 219,738 | 220,200 | (462) |
Table(18)
3.
(a)
To prepare: A table that shows realized gain or loss.
3.
(a)

Explanation of Solution
Statement shows the net gain or loss realized on sale of available for sale security.
Particulars | Sale proceeds ($) (A) | Cost ($) (B) | Gain/loss ($) |
1,000 shares of J Company | 23,248 | 20,740 | 2,508 |
1,500 shares of M Company | 35,615 | 40,695 | (5,080) |
1,200 shares of S Company | 56,720 | 55,665 | 1,055 |
600 shares of S.L Company | 9,315 | 13,980 | (4,665) |
900 shares of E.K Company | 19,850 | 15,498 | 4,352 |
(1,830) |
Table(19)
Thus, total amount of loss is $1,830 this should be reported in income statement.
(b)
To prepare: A table that shows unrealized gain or loss from the portfolio of long term investment
(b)

Explanation of Solution
Company | Fair Value ($) (A) | Cost of Security ($) (B) | Unrealized gain /loss ($) |
J | 20,740 | 21,500 | (760) |
S | 55,665 | 45,600 | 10,065 |
M | 40,695 | 46,350 | (5,655) |
S.L | 13,980 | 12,000 | (1,980) |
E.K | 15,498 | 17,325 | (1,827) |
Mi | 165,600 | 161,325 | 4,275 |
B&D | 54,600 | 50,835 | 3,765 |
7,883 |
Table(20)
Thus, the total unrealized gain is $7,883.
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Chapter C Solutions
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