
1.
To prepare:
1.

Explanation of Solution
For the year 2017,
To record purchase of 1,200 shares of ACompany at $25.50 per share plus $800 as commission
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
March 10 | Long term investment Trading securities | 31,400 | ||
Cash | 31,400 | |||
(Being long term investment purchase against cash) |
Table(1)
- The long term investment of P Company is increase. The long term investment is the asset of the company and the current asset of P Company also increases.
- The cash account is decrease by $31,400, and the credit of cash means that the current asset of the company also decreases.
To record purchase of 2,500 shares of F Company at $22.50 per share plus $1,033 as commission
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
April 7 | Long term investment Trading securities | 57,233 | ||
Cash | 57,233 | |||
(Being long term investment purchase against cash) |
Table(2)
- The long term investment of P Company is increase. The long term investment is the asset of the company and the current asset of P Company also increases.
- The cash account is decrease by $57,233, and the credit of cash means that the current asset of the company also decreases.
To record purchase of 600 shares of P O Company at $47 per share plus $890 as commission
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
September 1 | Long term investment Trading securities | 29,090 | ||
Cash | 29,090 | |||
(Being long term investment purchase against cash) |
Table(3)
- The long term investment of P Company is increase. The long term investment is the asset of the company and the current asset of P Company also increases.
- The cash account is decrease by $29,090, and the credit of cash means that the current asset of the company also decreases.
To record the unrealized gain occurs on December 31, 2017.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
December 31 | Fair value adjustment long term investment | 2,823 | ||
Unrealized gain | 2,823 | |||
(Being unrealized gain earned of $2,823 at the time of closing) |
Table(4)
- The fair value adjustment account is an adjustment account to account for the unrealized gain earn by P Company.
- The fair value of long term investment is less than the cost of share so the P Company earn an unrealized gain of $2,823, and unrealized gain increases the balance of income.
For the year 2018,
To record sale of 2,500 share of F Company at $20.50 and commission is $1,207.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
April 26 | Cash | 50,043 | ||
Loss on sale of long term investment | 7,190 | |||
Long term investment | 57,233 | |||
(Being long term investment sold at a loss 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 $57,233 amount.
- At the time of sale P Company receives the loss on sale of investment and this loss is debited to the loss on sale of long term investment account.
To record purchase of 1,800 shares of D Company at $19.25 per share plus $1,050 as commission
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
June 2 | Long term investment Trading securities | 35,700 | ||
Cash | 35,700 | |||
(Being long term investment purchase against cash) |
Table(6)
- The long term investment of P Company is increase. The long term investment is the asset of the company and the current asset of P Company also increases.
- The cash account is decrease by $35,700, and the credit of cash means that the current asset of the company also decreases.
To record purchase of 1,200 shares of S Company at $21 per share plus $280 as commission
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
June 14 | Long term investment Trading securities | 25,480 | ||
Cash | 25,480 | |||
(Being long term investment purchase against cash) |
Table(7)
- The long term investment of P Company is increase. The long term investment is the asset of the company and the current asset of P Company also increases.
- The cash account is decrease by $25,480, and the credit of cash means that the current asset of the company also decreases.
To record sale of 600 share of P O Company at $51 and commission is $845.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
November 27 | Cash | 29.755 | ||
Gain on sale of long term investment | 665 | |||
Long term investment | 29,090 | |||
(Being long term investment sold at a gain of $665 and receive cash ) |
Table(8)
- 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 $29,090 amount.
- At the time of sale P Company receives the gain on sale of investment and this gain is credited to the gain on sale of long term investment account.
To record the unrealized loss occurs on December 31, 2018.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
December 31 | Unrealized loss | 2,220 | ||
Fair value adjustment long term investment | 2,220 | |||
(Being unrealized loss suffered of $2,220 at the time of closing) |
Table(9)
- The fair value adjustment account is an adjustment account to account for the unrealized gain earn by P Company.
- The fair value of long term investment is more than the cost of share so the P Company suffer an unrealized loss of $2,220, and unrealized loss decreases the balance of income.
For the year 2019,
To record purchase of 1,000 shares of C Company at $40 per share plus $1,480 as commission
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
January 28 | Long term investment Trading securities | 41,480 | ||
Cash | 41,480 | |||
(Being long term investment purchase against cash) |
Table(10)
- The long term investment of P Company is increase. The long term investment is the asset of the company and the current asset of P Company also increases.
- The cash account is decrease by $41,480, and the credit of cash means that the current asset of the company also decreases.
To record sale of 1,200 share of A Company at $21.50 and commission is $1,850.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
August 22 | Cash | 23,950 | ||
Loss on sale of long term investment | 7,450 | |||
Long term investment | 31,400 | |||
(Being long term investment sold at a loss of $599 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 $57,233 amount.
- At the time of sale P Company receives the loss on sale of investment and this loss is debited to the loss on sale of long term investment account.
To record purchase of 3,000 shares of M Company at $28 per share plus $780 as commission
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
September 3 | Long term investment Trading securities | 84,780 | ||
Cash | 84,780 | |||
(Being long term investment purchase against cash) |
Table(12)
- The long term investment of P Company is increase. The long term investment is the asset of the company and the current asset of P Company also increases.
- The cash account is decrease by $84,780, 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 $24 and commission is $599.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
October9 | Cash | 28,201 | ||
Gain on sale of long term investment | 2,721 | |||
Long term investment | 25,480 | |||
(Being long term investment sold at a gain of $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 $25,480 amount.
- At the time of sale P 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 1,800 share of D Company at $15 and commission is $898.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
October. 31 | Cash | 26,102 | ||
Loss on sale of long term investment | 9,598 | |||
Long term investment | 35,700 | |||
(Being long term investment sold at a loss of $599 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 $35,700 amount.
- At the time of sale P Company receives the loss on sale of investment and this loss is debited to the loss on sale of long term investment account.
To record the unrealized gain occurs on December 31, 2019.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
December 31 | Fair value adjustment long term investment | 6,260 | ||
Unrealized gain | 6,260 | |||
(Being unrealized gain earned of $2,823 at the time of closing) |
Table(15)
- The fair value adjustment account is an adjustment account to account for the unrealized gain earn by P Company.
- The fair value of long term investment is less than the cost of share so the P Company earn an unrealized gain of $6,260, and unrealized gain increases the balance of income.
Working notes:
Calculation of the value of purchase price of shares, A Company,
Calculation of the value of purchase price of shares, F Company,
Calculation of the value of purchase price of shares, P O Company,
Calculation of fair value adjustment as on December 31, 2017,
Calculation of sale price of shares of F Company,
Calculation of loss in the sale of investment of F Company,
Calculation of the value of purchase price of shares, D Company,
Calculation of the value of purchase price of shares, S Company,
Calculation of sale price of shares of P O Company,
Calculation of Gain in the sale of investment of J Company,
Calculation of fair value adjustment as on December 31, 2018,
Calculation of the value of purchase price of shares, C Company,
Calculation of sale price of shares of A Company,
Calculation of loss in the sale of investment of A Company,
Calculation of the value of purchase price of shares, M Company,
Calculation of sale price of shares of S Company,
Calculation of Gain in the sale of investment of S Company,
Calculation of sale price of shares of D Company,
Calculation of loss in the sale of investment of D 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 | A | 31,400 |
F | 57,233 | |
P | 29,090 | |
2018 | A | 31,400 |
D | 35,700 | |
S | 25,480 | |
2019 | C | 41,480 |
M | 84,780 |
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 | A | 33,000 |
F | 52,500 | |
P | 29,400 | |
2018 | A | 34,800 |
D | 32,400 | |
S | 27,600 | |
2019 | C | 48,000 |
M | 72,000 | |
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 | 117,723 | 114,900 | 2,823 |
2018 | 92,580 | 94,800 | 2,220 |
2019 | 126,260 | 120,000 | 6,260 |
Table(18)
3.
(a)
To prepare: A table that shows realized gain or loss on sale of long term investment.
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 ($) |
2,500 shares of FCompany | 50,043 | 57,233 | (7,190) |
600 shares ofP O Company | 29,755 | 29,090 | 665 |
1,200 shares ofA Company | 23,950 | 31,400 | (7,450) |
1,200 shares ofS Company | 28,201 | 25,480 | 2,721 |
1,800 shares ofD Company | 26,102 | 35,700 | (9,598) |
(20,852) |
Table(19)
Thus, total amount of loss is $20,852 this should be reported in income statement.
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Chapter C Solutions
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