1.
Date | Account Titles and Explanation | Debit | Credit |
Year 1 | |||
Feb. 14 | Investment-Apollo Inc. | $124,992 | |
Cash (4800 × $26) + $192 | $124,992 | ||
(To record the investment) | |||
Apr. 01 | Investment-Ares Inc. (2300 × $19) +$92 | $43,792 | |
Cash | $43,792 | ||
(To record the investment) | |||
Jun. 01 | Cash [(600 × $32) -$100] | $19,100 | |
Gain on sale of investment, plug | $3,476 | ||
Investment-Apollo Inc. (124992/4800) × 600 | $15,624 | ||
(To record the sale of investment) | |||
Jun. 27 | Cash | $840 | |
Dividends revenue (4800-600) × $0.20 | $840 | ||
(To record the dividend revenue) | |||
Dec. 31 | Valuation allowance for trading investments | $27,990 | |
Unrealized gain on trading investments | $27,990 |
Compute Fair value adjustment year1
Cost | Units | Market rate | Fair value | Adjustment | |
Apollo Inc. | 109368 | 4200 | 33 | 138600 | 29232 |
Ares Inc. | 43792 | 2300 | 18.5 | 42550 | -1242 |
Total | 153160 | 181150 | 27990 |
____________________________________________________________________
Date | Account Titles and Explanation | Debit | Credit |
Year 2 | |||
Mar. 14 | Investment -Athena (1200 × $65) +$120 | $78,120 | |
Cash | $78,120 | ||
Jun. 26 | Cash | $882 | |
Dividend revenue (4200 × $0.21) | $882 | ||
Jul. 30 | Cash | $28,750 | |
Loss on sale of investments, plug | $2,498 | ||
Investment-Athens Inc. (78120/1200) × 480 | $31,248 | ||
Dec. 31 | Unrealized loss on trading investment | $40,022 | |
Valuation allowance for trading investments | $40,022 |
Working of fair value adjustment require-year2
Required valuation allowance for trading investments | 12032 |
Add: Debit balance of allowance year1 | 27990 |
Fair value adjustment require year2 | 40022 |
_________________________________________________________________________
2
Balance sheet -partial | ||
Current assets: | ||
Trading investment (at cost) | $200,032 | |
Less: Valuation allowance for trading investments | ($12,032) | |
Trading investment ( at fair value) | $188,000 |
______________________________________________________________
3.
Solution 3 is already mentioned in the problem.
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