PROBLEM 17.3
(a) Debt Investments ……………………………………………. 162,000*
Equity Investments …………………………………………. 37,400
Interest Revenue ($50,000 X .12 X 4/12) ……………. 2,000
(b) December 31, 2020
Interest Receivable …………………………………………. 8,025
Debt Investments …………………………………….. 51
(c) December 31, 2020
Available-for-Sale Debt Portfolio
Securities
Cost
Fair Value
Unrealized
Gain (Loss)
U.S. government bonds
$110,000
$124,700
$14,700
PROBLEM 17.3 (Continued)
Fair Value Adjustment …………………………………… 21,351
Unrealized Holding Gain or Loss—Equity … 21,351
PROBLEM 17.4
(a) The bonds were purchased at a discount. That is, they were purchased
(b) December 31, 2020
Fair Value Adjustment ……………………………………….. 4,850
Unrealized Holding Gain or Loss—Equity …….. 4,850
Available-for-Sale Portfolio
(c) December 31, 2021
Available-for-Sale Portfolio
Amortized
Cost
Fair
Value
Unrealized
Gain (Loss)
Debt Investment
$519,442
$509,000
$(10,442)
PROBLEM 17.5
(a) Gross selling price of 3,000 shares at $22 …………. $66,000
Commissions, taxes, and fees ………………………….. (2,150)
(b) The total purchase price is:
(1,000 X $33.50) + $1,980 = $35,480.
(c) Equity Securities Portfolio—December 31, 2021
Securities
Cost
Fair Value
Unrealized
Gain (Loss)
Munter Ltd.
$580,000
$610,000*
($30,000
King Co.
255,000
240,000**
(15,000)
Castle Co.
29,000***
Total of portfolio
PROBLEM 17.5 (Continued)
(d) The unrealized holding gains or losses should be reported on the
income statement in the “Other revenue and gains” section. On the
PROBLEM 17.6
(1) October 10, 2020
(2) November 2, 2020
(3) At September 30, 2020, McElroy had the following fair value
adjustment:
Equity Securities Portfolio—September 30, 2020
Securities
Cost
Fair
Value
Unrealized
Gain (Loss)
Horton, Inc. common
$215,000
$200,000
($(15,000)
Monty, Inc. preferred
Previous fair value adjustment
PROBLEM 17.6 (Continued)
At December 31, 2020, McElroy had the following fair value
adjustment:
Securities Portfolio—December 31, 2020
Securities
Cost
Fair
Value
Unrealized
Gain (Loss)
Monty, Inc. preferred
$133,000
$106,000
($(27,000)
Oakwood Corp. common
The entry on December 31, 2020 is therefore as follows:
PROBLEM 17.7
(a) February 1
Debt Investments …………………………………………….. 300,000
Interest Revenue (4/12 X .10 X $300,000) …………… 10,000
Cash ………………………………………………………… 310,000
April 1
September 1
Cash [($60,000 X .99) + ($60,000 X .10 X 5/12)] …… 61,900
Loss on Sale of Investments ……………………………. 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
Available-for-Sale Portfolio
Security
Cost
Fair
Value
Unrealized
Gain (Loss)
Gibbons Co.
$240,000
$228,000*
$(12,000)
Sampson, Inc.
Total
$440,000
$(26,000)
(b) All the entries would be the same, except held-to-maturity securities
would be carried at amortized cost and not valued at fair value at year-
end, so the last entry would not be made.
PROBLEM 17.8
(a) Fair Value Adjustment ……………………………………. 645,000
Unrealized Holding Gain or Loss—Income .. 645,000
Computations: Computations of Unrealized Gain or Loss in 2020
Security
Cost
Fair Value
Unrealized
Gain (Loss)
Delaney Motors
$ 1,400,000
$1,600,000
($(200,000
Patrick Electric
$ 645,000
* Computations of Unrealized Gain or Loss in 2019
Security
Cost
Fair Value
Unrealized
Gain (Loss)
Norton Ind.
$22,500,000
$21,500,000
PROBLEM 17.8 (Continued)
(b) The unrealized holding loss on the valuation on the equity securities is
reported on the income statement. The gain would appear in the “Other
revenues and gains” section of the income statement. The Fair Value
(c) Equity Investments (Norton Industries) ………………… 125,000
Investment Income ($500,000 X 25%) …………….. 125,000
PROBLEM 17.9
(a) January 1, 2020
Fair value of available-for-sale securities …………… $240,000
Accumulated other comprehensive income ……….. (30,000)
Cost basis of available-for-sale securities ………….. $210,000
As indicated, the cost basis at January 1, 2020 is $210,000, At
The entry to record the sale is as follows.
Cash ………………………………………………………………… 100,000
Debt Investments ………………………………………. 70,000
Gain on the sale of the investment ……………… 30,000
(b) The computation of the unrealized holding gain or loss in 2020 is
computed as follows:
Accumulated comprehensive income at
PROBLEM 17.9 (Continued)
(c) ACKER INC.
Statement of Comprehensive Income
For the Year Ended December 31, 2020
Net income ………………………………………………………….. $35,000
Other comprehensive income
Acker will provide the following disclosure for
Accumulated other comprehensive income:
Beginning balance, January 1, 2020 $30,000
**Accumulated other comprehensive
income 12/31/20 ………………………………………………. $50,000
PROBLEM 17.9 (Continued)
(d) ACKER INC.
Balance Sheet
As of December 31, 2020
Assets
Stockholders’ Equity
Cash
$155,000*
Common stock
$260,000
comprehensive income
Debt investments
Retained earnings
35,000
PROBLEM 17.10
(a) March 1, 2020
Cash ……………………………………………………………….. 1,800
Dividend Revenue (900 X $2) ……………………. 1,800
April 30, 2020
Cash ……………………………………………………………….. 3,300
Security
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)
1,800
Total of portfolio
$36,400
$ 1,000
February 1, 2021
5. Cash ……………………………………………………………….. 1,600
Loss on Sale of Investments [200 X ($8 – $9)] ……. 200
PROBLEM 17.10 (Continued)
December 21, 2021
7. Dividend Receivable ………………………………………… 3,300
Security
Cost
Fair Value
Unrealized
Gain (Loss)
Evers Comp.
$16,600
$20,900(1)
$4,300
Rogers Comp.
18,000
18,900(2)
900
Total of portfolio
$34,600
$5,200
(b)
Partial Balance Sheet as of
December 31,
2020
December 31,
2021
Current Assets
Dividend receivable
$ 0
$ 3,300
Investments
PROBLEM 17.11
(a) Balance Sheet at December 31, 2020
Equity Investments, at fair value …………………………………… $123,000
(Reported as current or noncurrent based on intent)
(b) Balance Sheet at December 31, 2021
Equity Investments, at fair value …………………………………… $94,000
(Reported as current or noncurrent based on intent)
PROBLEM 17.11 (Continued)
(c) Balance Sheet at December 31, 2022
Income Statement for year ended December 31, 2022
Other expenses and losses
Loss on Sale of Investments ($8,100 + $2,700) ………. $10,800
Unrealized gain (see Schedule A) 50,000
Schedule A: Unrealized Holding Gains or Losses
Portfolio
Year
Cost
Fair Value
Unrealized
Holding Gain
(Loss):
FV Adj.
Previous
Fair Value
Adjustment
Gain
(Loss) in
Income
12/31/20
$127,000
$123,000
($4,000)
$0
($4,000)
12/31/21
94,000
(42,000)
(38,000)
*PROBLEM 17.12
(a) July 7, 2020
Call Option …………………………………………………….. 240
Cash ………………………………………………………… 240
(b) September 30, 2020
Call Option …………………………………………………….. 1,400
(c) December 31, 2020
Unrealized Holding Gain or Loss—Income ……….. 400
Call Option ($2 X 200) ……………………………….. 400
(d) January 4, 2021
Call Option ($1 X $200) ……………………………………. 200
Unrealized Holding Gain or Loss—Income …. 200
*Value of Call Option at Settlement:
Call Option
240
200
*PROBLEM 17.13
(a) July 7, 2020
Put Option ………………………………………………………. 240
Cash …………………………………………………………. 240
(b) September 30, 2020
(d) January 31, 2021
Loss on Settlement of Put Option …………………….. 50