Question

E 12-17 The accounting records of Jamaican Importers, Inc., at January 1, 2021, included the following: Equity investments, fair value through net income .LO12-5 Assets: Investment in IBM common shares $1,345,000 Less: Fair value adjustment (145,000) $1,200,000 No changes occurred during 2021 in the investment portfolio. Required Prepare appropriate adjusting entry(s) at December 31, 2021. assuming the fair value of the IBM common shares 1. S1.175.000 2. $1.275,000 3. S1,375,000

Answer 1

Answer! 1 Loss during fair value Adjustment = fair value - Investment = $1,175,000-$1,345,000 Loss during fair value Adjustment = $170,000 there is already a reserve for 145000 so we need to create additional 25000 reserve (179000 –14500D) Investment in RBM Common shares $1,345,000 Less: Fair value adjustment C8170,000) $1175,000 Debit particulars Credit Accumulated anrealised nording - casses and gains Ale ar $ 25,000 TO Fair value adjustment 1$ 25000 Loss during fair value Adjustment fair value - Investment 5481,275,000-$1,345,000 = $70,000 There is already a reserve for 145000 so we need to decreast recurve by 25000 70000_145000T Investment in IBM Common Suary $1,345,000 lessi fair value adjustment ($70000) $1,275,000 credit particulars Debit Fair value adjustment Ale dr $ 75,000 TO Accumulated conrealized holding losses and hairy $$75,000

. I profit during pair value adjustment fair value Investment =$1,375,000 $1345000 = $ 30,000 There is already a resuve for 145,000 sowe need to decrease the fund by $175,000 (145000+30,000) so that profit of 30,000 can re recorded Investment in PBM Common shares $1345,000 Add: Fair value Adjustment $30,000 $1375,000 I credit particulars Debit fair value Adjustment Ale dr $175,000 To Accumulated unrealized holding losses I and gains $175,000