Question

On December 21, 2020, Concord Company provided you with the following information regarding its equity investments. December 31, 2020 Investments (Trading) Cost Fair Value Unrealized Gain (Loss) Clemson Corp. stock $20,800 $19,900 $(900) Colorado Co. stock 9,300 8,300 (1,000) Buffaloes Co. stock 20,800 21,420 620 Total of portfolio $50,900 $49,620 (1,280) Previous fair value adjustment balance Fair value adjustment-Cr. $(1,280) During 2021, Colorado Co. stock was sold for $8,790. The fair value of the stock on December 31, 2021, was Clemson Corp. stock-$19,990; Buffaloes Co.stock-$21,320. None of the equity investments result in significant influence. (a) Prepare the adjusting journal entry needed on December 31, 2020. (b) Prepare the journal entry to record the sale of the Colorado Co. stock during 2021. (c) Prepare the adjusting journal entry needed on December 31, 2021.

Answer 1

Adjusting Entries:

	Date	Account Titles and Explanations	Debit	Credit
a)	Dec. 31, 2020	Unrealized Holding Gain	$1,280
		Fair Value Adjustment ($900 + $1,000 - $620)		$1,280
		(To record the adjusting entry on December 31, 2020)
b)	2021	Cash	$8,790
		Loss on Sale of Securities ($9,300 - $8,790)	$510
		Available for Sale Securities - Colorado Co.		$9,300
		(To record the entry of sale of Colorado Co. stock in 2021)
c)	Dec. 31, 2021	Fair Value Adjustment [$1,280 - ($20,800 - $19,990) + ($20,800 - $21,320)]	$990
		Unrealized Holding Gain or Loss		$990
		(To record the adjusting entry on December 31, 2021)