Question

Sage Company has the following securities in its portfolio on December 31, 2020. None of these investments are accounted for under the equity method.

Investments		Cost		Fair Value
1,500 shares of Gordon, Inc., Common		$77,600		$73,200
5,000 shares of Wallace Corp., Common		172,900		167,700
400 shares of Martin, Inc., Preferred		63,500		65,100
		$314,000		$306,000

All of the securities were purchased in 2020.
In 2021, Sage completed the following securities transactions.

March 1		Sold the 1,500 shares of Gordon, Inc., Common, @ $45 less fees of $1,200.
April 1		Bought 700 shares of Earnhart Corp., Common, @ $75 plus fees of $1,300.

Sage’s portfolio of equity securities appeared as follows on December 31, 2021.

Investments		Cost		Fair Value
5,000 shares of Wallace Corp., Common		$172,900		$167,700
700 shares of Earnhart Corp., Common		53,800		50,100
400 shares of Martin, Inc., Preferred		63,500		61,700
		$290,200		$279,500

Prepare the general journal entries for Sage Company for:

(a)		The 2020 adjusting entry.
(b)		The sale of the Gordon stock.
(c)		The purchase of the Earnhart stock.
(d)		The 2021 adjusting entry for the trading portfolio.

(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.)

No.	Account Titles and Explanation	Debit	Credit
(a)
(b)
(c)
(d)

Answer 1

Credit Debit 8,000 $ No Account Titles and Explanation (a) Unrealized Holding Gain or Loss - income Fair value adjustment (Trading) (being unrealised loss recorded) $ 8,000 $ 66,300 $ 11,300 (b) Cash Loss on sale of investments Equity Investments (Trading) (Being equity investments sold recorded) $ 77,600 $ 53,800 (C) Equity Investments (Trading) Cash (Being equity Investments purchased recorded) $ 53,800 (d) $ 2,700 Unrealized Holding Gain or Loss - income Fair value adjustment (Trading) (Being unrealised loss recorded) $ 2,700

Working notes: Investments 1,500 shares of Gordon, Inc., Common 5,000 shares of Wallace Corp., Common 400 shares of Martin, Inc., Preferred Fair Value adjustment -Cr Cost Fair Value Unrealized Gain(Loss $ 77,600 $ 73,200 $ (4,400) $ 172,900 $ 167,700 $ (5,200 $ 63,500 $ 65,100 S 1,600 (8,000)| (b) Equity investments = $77,600 Cash = (1500*$45)-$1,200 = $66,300 Loss on sale of Investments = $77,600-$66,300 - $11,300 (c) Equity Investments (Trading) = (700*$75)+$1,300 = $53,800 (d) Investments 5,000 shares of Wallace Corp., Common 700 shares of Earnhart Corp., Common 400 shares of Martin, Inc., Preferred Total portfolio Previous fair value adjustment -Cr Fair Value adjustment -Cr Cost Fair Value Unrealized Gain (Loss $ 172,900 $ 167,700 $ (5,200) $ 53,800 $ 50,100 $ (3,700)| $ 63,500 $ 61,700$ (1,800) $ 290,200 $ 279,500 $ (10,700) (8,000) (2,700)