P17-5 Parnevik Company
has the following securities in its investment portfolio on December 31, 2014
(all securities were purchased in 2014):
3,000 shares of Anderson Co. common stock which
cost $58,500
10,000 shares of Munter Ltd. common stock which
cost $580,000
6,000 shares of King Company preferred stock which
cost $255,000
The Securities Fair Value Adjustment account shows a credit of $10,100
at the end of 2014. In 2015, Parnevik completed the following securities
transactions.
1. On January 15, sold 3,000 shares of Anderson’s common stock at
$22 per share less fees of $2,150
2. On April 17, purchased 1,000 shares of Castle’s common stock at
$33.50 per share plus fees of $1,980 On December 31, 2015, the market
values per share of these securities were:
Munter Ltd. $61.00
King Co. $40.00
Castle Co. $29.00
In addition, the accounting supervisor of Parnevik told you that, even
though all these securities have readily determinable fair values, Parnevik
will not actively trade these securities because the top management intends to
hold them for more than one year.
Instructions
(a) Prepare
the entry for the security sale on January 15, 2015.
(b) Prepare the journal entry to record the security purchase on April 17, 2015.
(c) Compute the unrealized gains or losses and prepare the adjusting entry for Parnevik on December 31, 2015.
(d) How should the unrealized gains or losses be reported on Parnevik’s balance sheet?
(b) Prepare the journal entry to record the security purchase on April 17, 2015.
(c) Compute the unrealized gains or losses and prepare the adjusting entry for Parnevik on December 31, 2015.
(d) How should the unrealized gains or losses be reported on Parnevik’s balance sheet?
TUTORIAL PREVIEW
(a) Prepare the entry for the security sale on January 15, 2015.
|
Gross
selling price of 3,000 shares at $22
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$66,000
|
|
Less: Commissions,
taxes, and fees
|
-2,150
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