PROBLEM 17.1 (Continued)
Amortized
Cost
Fair
Value
Unrealized
Gain (Loss)
Spangler Company, 7% bonds
$103,719
$105,650
$1,931
PROBLEM 17.2
(a) January 1, 2019 purchase entry:
(b) The amortization schedule is as follows:
Schedule of Interest Revenue and Bond
Discount Amortization
8% Bonds Purchased to Yield 10%
Date
Interest
Receivable
Or
Cash Received
(1)
Interest
Revenue
@10%
(2)
Carrying
Amount of
Bonds
1/1/19
—
—
€369,114
7/1/19
€ 16,000
€ 18,456
371,570
12/31/19
16,000
18,579
374,149
16,000
18,707
376,856
16,000
18,843
379,699
16,000
19,134
385,818
16,000
19,291
389,109
16,000
19,455
392,564
16,000
19,628
396,192
400,000
Total
(c) Interest entries:
July 1, 2019
Cash ………………………………………………………………. 16,000
Debt Investments ……………………………………………. 2,456
Interest Revenue ……………………………………… 18,456
PROBLEM 17.2 (Continued)
(d) January 1, 2021 sale entry:
Selling price of bonds ………………………………………………….. €370,726
(e) December 31, 2019 adjusting entry:
Securities
Amortized Cost
Fair Value
Unrealized
Gain (Loss)
Aguirre (total portfolio
value)
*
€374,149*
€368,000
€(6,149)
PROBLEM 17.3
(a) Equity Investments ………………………………………… 37,400
(b) December 31, 2019
Interest Receivable ………………………………………… 8,025
(c) December 31, 2019
Investment Portfolio
Investments
Cost
Fair Value
Unrealized
Gain (Loss)
Sharapova Company shares
$ 37,400
$ 31,800
$(5,600)
Fair value adjustment—Dr.
PROBLEM 17.3 (Continued)
Fair Value Adjustment ………………………………….. 15,700
Unrealized Holding Gain or Loss—
PROBLEM 17.4
(a) The bonds were purchased at a discount. That is, they were purchased
at less than their face value because the bonds’ amortized cost
increased from €491,150 to €550,000.
(b) December 31, 2019
Fair Value Adjustment ………………………………………. 4,850
(c) December 31, 2020
Unrealized Holding Gain or Loss—Income …………. 16,292
Fair Value Adjustment ……………………………….. 16,292
Debt Investment Portfolio
Amortized
Cost
Fair
Value
Unrealized
Gain (Loss)
(d) The only difference is that the unrealized gain or loss is recorded in
other comprehensive income:
PROBLEM 17.5
(a) Gross selling price of 3,000 shares at $22 …………. $66,000
Less: Commissions, taxes, and fees ……………….. 2,150
(b) The total purchase price is:
(1,000 X $33.50) = $33,500.
The purchase entry will be:
April 17, 2020
(c) Equity Investment Portfolio—December 31, 2020
Investments
Cost
Fair
Value
Unrealized
Gain (Loss)
Munter Ltd.
$580,000
$610,000
($30,000)
King Co.
255,000
240,000
(15,000)
Castle Co.
Fair value adjustment—Dr.
December 31, 2020
Fair Value Adjustment ……………………………………….. 20,600
Unrealized Holding Gain or Loss—Income …… 20,600
PROBLEM 17.5 (Continued)
(d) The unrealized holding gains or losses account should be reported on
(e) If the King Company preference shares are classified as non-trading,
the unrealized holding loss would be recorded in other comprehensive
PROBLEM 17.6
(a) (1) October 10, 2019
(2) November 2, 2019
Equity Investments (3,000 X £54.50) ………….. 163,500
Cash ………………………………………………… 163,500
(3) At September 30, 2019, McElroy had the following fair value
adjustment:
Equity Investment Portfolio—September 30, 2019
Investments
Cost
Fair
Value
Unrealized
Gain (Loss)
Horton, Inc. ordinary
£215,000
£200,000
(£ (15,000)
Monty, Inc. preference
PROBLEM 17.6 (Continued)
At December 31, 2019, McElroy had the following fair value
adjustment:
Equity Investment Portfolio—December 31, 2019
Investments
Cost
Fair
Value
Unrealized
Gain (Loss)
Monty, Inc. preference
£133,000
£106,000
(£ (27,000)
Oakwood Corp. ordinary
(b) The entries would be the same except that instead of debiting and
crediting accounts associated with trading investments, the accounts
used would be associated with non-trading investments. In addition, the
PROBLEM 17.7
(a) February 1
Debt Investments ……………………………………………. 300,000
Interest Revenue (4/12 X .10 X £300,000) ………….. 10,000
Cash ……………………………………………………….. 310,000
September 1
Cash [(£60,000 X 99%) + (£60,000 X .10 X 5/12)] … 61,900
Loss on Sale of Investments
[(£60,000 x .99) – £60,000] ……………………………… 600
Debt Investments …………………………………….. 60,000
Interest Revenue
(5/12 X .10 X £60,000 = £2,500) ………………. 2,500
October 1
PROBLEM 17.7 (Continued)
December 31
Interest Receivable …………………………………………. 7,500
Interest Revenue ……………………………………… 7,500
December 31
Unrealized Holding Gain or Loss—Income ……….. 26,000
Fair Value Adjustment ……………………………… 26,000
Debt Investment Portfolio
Investments
Cost
Fair Value
Unrealized
Gain (Loss)
Gibbons Co.
£240,000
£228,000*
£(12,000)
Sampson, Inc.
Total
£440,000
£414,000
£(26,000)
(Note to instructor: Some students may debit Interest Receivable at date
of purchase instead of Interest Revenue. This procedure is correct,
(b) If classified as HFCS, all entries are the same, except the unrealized
loss at December 31 will be recorded in other comprehensive income
(equity).
PROBLEM 17.8
(a) 1. Trading investments:
Unrealized Holding Gain or Loss—
Computations:
1.
Investments
Cost
Fair Value
Unrealized
Gain (Loss)
Delaney Motors
Patrick Electric
Total of portfolio
2.
Computation of Unrealized Gain or Loss in 2018
Investments
Cost
Fair Value
Unrealized
Gain (Loss)
Norton Ind.
$22,500,000
$21,500,000
(($1,000,000)
Computation of Unrealized Gain or Loss in 2019
Investments
Cost
Fair Value
Unrealized
Gain (Loss)
$22,225,000
$ 725,000
PROBLEM 17.8 (Continued)
(b) The unrealized holding loss on the valuation of Brooks’ trading
investments is reported on the income statement. The loss would appear
The unrealized holding gain on the valuation of Brooks’ non-trading
investments is reported as other comprehensive income and as a
(c) Equity Investments ($500,000 X 25%) …………………… 125,000
Investment Revenue ……………………………………. 125,000
PROBLEM 17.9
(a) Equity Investment Portfolio
Investments
Cost
Fair Value
Unrealized
Gain (Loss)
Frank, Inc.
$ 22,000
$ 32,000
($(10,000)
Ellis Corp.
115,000
95,000
(20,000)
Mendota Company
Total of portfolio
Income Statement
Other income and expense
Unrealized holding loss ……………………… $38,000
(b) Equity Investment Portfolio
Investments
Cost
Fair Value
Unrealized
Gain (Loss)
Ellis Corp.
$115,000
$140,000
($ 25,000
Mendota Company
174,000*
138,000**
( (36,000)
Total of portfolio
$289,000
$278,000
PROBLEM 17.9 (Continued)
Statement of Financial Position—December 31, 2020
Investments:
Equity Investments, at cost ……………………….. $289,000
Less: Fair value adjustment ……………………… 11,000
PROBLEM 17.10
(a)
1. March 1, 2019
Cash ……………………………………………………………….. 1,800
Dividend Revenue (900 X £2) …………………….. 1,800
3. May 15, 2019
Equity Investments ………………………………………….. 1,600
Cash (100 X £16) ………………………………………. 1,600
Investments
Cost
Fair Value
Unrealized
Gain (Loss)
Evers Comp. (£15,000 + £1,600)
£ 16,600
£ 18,700(1)
£2,100
Rogers Comp.
18,000
17,100(2)
(900)
Chance Comp. (£4,500 – £2,700)
Total of Portfolio
Adjustment to fair value—Dr.
£8,500
5. February 1, 2020
Cash ……………………………………………………………….. 1,600
Loss on Sale of Investments …………………………….. 200
Equity Investments ……………………………………… 1,800
PROBLEM 17.10 (Continued)
7. December 21, 2020
8. December 31, 2020
Equity Investments ………………………………………… 4,200
Unrealized Holding Gain or Loss—Equity …. 4,200
Investments
Cost
Fair Value
Unrealized
Gain (Loss)
Evers Comp.
£16,600
£20,900(1)
£4,300
Rogers Comp.
900
Previous adjustments to fair
value —Dr.
(b)
Partial Statement of Financial
Position as of
December 31,
2019
December 31,
2020
Equity Investments, at fair value
Current Assets
(c) If the Evers investment was classified as trading, the unrealized
holding gain would not be reported as equity. Instead the unrealized
PROBLEM 17.11
(a) Statement of Financial Position
Equity Investments, at fair value …………………………………… €123,000
(b) Statement of Financial Position
Equity Investments, at fair value …………………………………… € 94,000
Income Statement
Other income and expense
(c) Statement of Financial Position
Equity Investments, at fair value ……………….. € 88,000
PROBLEM 17.11 (Continued)
Income Statement
Other income and expense
The entry made to record the sale of Lindsay Jones’ shares was:
Cash ……………………………………………………………… 39,900