Problem 12–7 (continued)
December 31
Adjusting entries:
Accumulated
Unrealized
Equity Securities Cost Fair Value Gain (Loss)
$10,000*
*Need to move from a fair-value adjustment of $0 to $10,000:
Fair-Value
Adjustment
1/1/2018 0
Unrealized holding gain—NI……………………………..
10,000
Fair Value
Adjustment
Balance on 1/1/2018 $0
± Adjustment needed to update fair value ?
Balance needed on 12/31/2018 $10,000
Problem 12–7 (concluded)
Requirement 2
Income statement:
Dividend revenue $ 16,000
Statement of comprehensive income:
Balance sheet:
Current Assets
$2,310,000
Shareholders’ Equity
Problem 12–8
Requirement 1
2018
December 12 ($ in millions)
December 13
December 15
1) Updating the fair-value adjustment:
Need to move from a fair-value adjustment of $0 to $0.1 million:
Fair-Value
Adjustment
12/12/2018 0
Fair Value
Adjustment
Balance on 12/12/2018 $0
± Adjustment needed to update fair value ?
December 22
December 23
1) Updating the fair-value adjustment:
Need to move from a fair-value adjustment of $0 to ($1) million:
Fair-Value
Adjustment
12/13/2018 0
Change needed 1
Unrealized holding loss—NI (to balance)……………………………….. 1
Fair-value adjustment ……………………………………………………. 1
Note: the loss included in NI equals the difference between the proceeds ($10
Fair Value
Adjustment
Balance on 12/13/2018 $0
± Adjustment needed to update fair value ?
December 26
1) Updating the fair-value adjustment:
Need to move from a fair-value adjustment of $0 to $1 million:
Fair-Value
Adjustment
12/22/2018 0
Fair-value adjustment………………………………………………………… 1
Unrealized holding gain—NI (to balance) ………………………….. 1
2) Recording the sale transaction:
Fair Value
Adjustment
Balance on 12/22/2018 $0
± Adjustment needed to update fair value ?
Problem 12–8 (continued)
December 27
1) Updating the fair-value adjustment:
Need to move from a fair-value adjustment of $0 to ($2) million:
Fair-Value
Adjustment
12/22/2018 0
Change needed 2
Note: the loss included in NI equals the difference between the proceeds ($63
million) and the carrying value of the investment ($65 million).
2) Recording the sale transaction:
Fair Value
Adjustment
Balance on 12/22/2018 $0
± Adjustment needed to update fair value ?
December 31
Adjusting entry:
Unrealized holding loss—NI
Requirement 2
($ in millions)
Balance sheet (short-term investment):
Income statement:
Problem 12–8 (concluded)
Requirement 3
2019
January 2
1) Updating the fair-value adjustment:
Need to move from a fair-value adjustment of ($1) to ($0.8) million:
Fair-Value
Adjustment
12/31/2018 1
Note: the gain included in NI equals the difference between the proceeds ($10.2
million) and the carrying value of the investment ($10 million).
2) Recording the sale transaction:
($ in millions)
January 5
Fair Value
Adjustment
Balance on 12/31/2018 ($1)
± Adjustment needed to update fair value ?