Question

2. On December 31, 2020 Woods International owned the following securities held as a long-term investment. The securities were not held for influence or control of the investee. Common Stock Shares Cost Trevino Co. 2,000 $60,000 Player Co. 5,000 45,000 Palmer Co. 1,500 30,000 On December 31, 2020, the total fair value of the securities was equal to their cost. In 2021 the following transactions occurred. July 1 Received $1 per share semiannual dividend on Player Co. common stock. Aug. 1 Received $.50 per share cash dividend on Trevino Co. common stock. Sept. 1 Sold 1,500 shares of Player Co. common stock for cash at $8 per share. Oct. 1 Sold 800 shares of Trevino Co. common stock for cash at $33 per share. Nov. 1 Received $1 per share cash dividend on Palmer Co. common stock. Dec. 15 Received $.50 per share cash dividend on Trevino Co. common stock. Dec. 31 Received $1 per share semiannual cash dividend on Player Co. common stock. At December 31, the fair value per share of the common stocks were: Trevino Co. $32, Player Co. $8, and Palmer Co. $18. Instructions a. Journalize the 2021 transactions and post to the account Stock Investments. (Use the T-account form) b. Prepare the necessary adjusting entry at December 31, 2021, to show the securities at fair value. The stock should be classified as available-for-sale securities.. C. Show the balance sheet presentation of the investments at December 31, 2021.

Answer 1

a & b) Journal Entries:
date	Acc Titles	Debit $	Credit $
2021
1-Jul	Cash	5000
	dividend revenue		5000
	(dividend @ 1 received from Player)
1-Aug	Cash	1000
	dividend revenue		1000
	(dividend @ 0.5 received from Trevino)
1-Sep	Cash	12000		(1500*8)
	Loss on sale of securities	1500
	Available for Sale Securities-Player		13500	(45000*1500/5000)
	(sale of 1500 CS of Player)
1-Oct	Cash	26400		(800*33)
	Available for Sale Securities-trevino		24000	(60000*800/2000)
	Profit on Sale of securities		2400
	(sale of 800 CS of Trevino)
1-Nov	Cash	1500
	dividend revenue		1500
	(dividend @ 1 received from jPalmer)
15-Dec	Cash	600		(2000-800)*0.5
	dividend revenue		600
	(dividend @ 0.5 received from Trevino)
31-Dec	Cash	3500		(5000-1500)*1
	dividend revenue		3500
	(dividend @ 1 received from Player)
31-Dec	Unrealised Income	4100
	Available for Sale Securities-trevino	2400		1200*(32-30)
	Available for Sale Securities-Player		3500	3500*(9-8)
	Available for Sale Securities-Palmer		3000	1500*(20-18)
	(unrealised loss recorded on fair valuation at year end)

T-Accounts:
DEBIT	AMOUNT $	CREDIT	AMOUNT $
Cash
1-Jul	5000	CB	50000
1-Aug	1000
1-Sep	12000
1-Oct	26400
1-Nov	1500
15-Dec	600
31-Dec	3500
Dividend Revenue
CB	11600	1-Jul	5000
		1-Aug	1000
		1-Nov	1500
		15-Dec	600
		31-Dec	3500
Available for Sale Securities-Player
OB	45000	1-Sep	13500
		31-Dec	3500
		CB	28000
Available for Sale Securities-Trevino
OB	60000	1-Oct	24000
31-Dec	2400	CB	38400
Available for Sale Securities-Palmer
OB	30000	31-Dec	3000
		CB	27000
Unrealised Loss
31-Dec	4100
Profit on Sale of securities
		1-Oct	2400
Loss on sale of securities
1-Sep	1500

c) Balance Sheet:
Assets	Amount $
Cash	50000
Long term Securities:
Available for Sale Securities-Player	28000
Available for Sale Securities-Trevino	38400
Available for Sale Securities-Palmer	27000
Total Assets	143400
Liabilities:	Amount $
Capital	135000
Retained Earnings:
Net Income	11600
Profit on Sale of securities	2400
Loss on sale of securities	-1500
Unrealised Loss	-4100
Total Liabilities and Capital	143400