Description
Wildhorse Company has a stock portfolio valued at $3,900. Its cost was $3,100. If the Fair Value Adjustment account has a debit balance of $220, prepare the journal entry at year-end. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
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Explanation & Answer
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Debit Amount
($)
Particulars
Fair Value Adjustment (available-for-sale) A/c
Dr.
Unrealized Gain or Loss—Equity A/c
Credit Amount
($)
580
580
Calculations and Explanations:
a) Portfolio valued
= $3,900
b) Less: Cost
= $3,100
c) Unrealized profit = (a-b) = ($3,900-$3,100)
= $800
d) Fair Value Adjustment account
= $220 debit
e) Net unrealized Gain-equity= (c-d) = ($800-$220)
= $580
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Question 1 solution
Debit Amount
($)
Particulars
Fair Value Adjustment (available-for-sale) A/c
Dr.
Unrealized Gain or Loss—Equity A/c
Credit Amount
($)
580
580
Calculations and Explanations:
a) Portfolio valued
= $3,900
b) Less: Cost
= $3,100
c) Unrealized profit = (a-b) = ($3,900-$3,100)
= $800
d) Fair Value Adjustment account
= $220 debit
e) Net unrealized Gain-equity= (c-d) = ($800-$220)
= $580
Question 2 Solution
1. We Classify the amounts in proper accounts:
Available for sale securities (96000+(476×104))
Equity Investment
Interest revenue (47600×.12×4/12)
Investment
$145,504
$36,200
$1,904
$183,608
2. entry to record the accrued interest and the amortization of prem...
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