Question

Problem 17-5 Pronghorn Company has the following securities in its investment portfolio on December 31, 2017 (all securities were purchased in 2017): (1) 3,100 shares of Anderson Co. common stock which cost $62,000, (2) 10,000 shares of Munter Ltd. common stock which cost $570,000, and (3) 6,600 shares of King Company preferred stock which cost $283,800. The Fair Value Adjustment account shows a credit of $10,800 at the end of 2017. In 2018, Pronghorn completed the following securities transactions. 1. On January 15, sold 3,100 shares of Anderson's common stock at $22 per share less fees of $2,130. 2. On April 17, purchased 1,000 shares of Castle's common stock at $35 per share plus fees of $2,160 On December 31, 2018, the market prices per share of these securities were Munter $65, King $40, and Castle $22. In addition, the accounting supervisor of Pronghorn told you that, even though all these securities have readily determinable fair values, Pronghorn will not actively trade these securities because the top management intends to hold them for more than one year Prepare the entry for the security sale on January 15, 2018. (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.) Date Account Titles and Explanation Debit Credit Jan. 15, 2018 SHOW LIST OF ACCOUNTS LINK TO TEXT

Answer 1

Ans-A)- Preparing the entry for the security sale on January 15,2018:-

Gross selling price of 3,100 shares at $ 22	$68,200
Less: Commissions, taxes and fees	($2,130)
Net proceeds from sale	$66,070
Cost of 3,100 shares	($62,000)
Gain on sale of investments	$4,070

Journal entry

Date	Account Titles and Explanation	Debit	Credit
Jan.15, 2018	Cash A/c Dr.	$66,070
	Equity Investments (Available for sale)		$62,000
	Gain on sale of stock		$4,070

B)-Preparing the journal entry to record the security purchase on April 17, 2015:-

Total Purchase Price is :
Number of shares	1,000
Cost per share	$35
Cost for shares	$35,000
Add: Fees paid	$2,160
Total cost of shares	$37,160

Journal entry

Date	Account Titles and Explanation	Debit	Credit
Apr.17,2018	Equity Investments (Available for sale) A/c Dr.	$37,160
	Cash A/c		$37,160

C)- Calculation of Unrealized gains or losses:-

Available for Sale Portfolio- December 31, 2018

Securities	Cost	Fair Value	Unrealized gain or loss
Munter Ltd.	$570,000	$650,000 ($65 *10,000 shares)	$80,000
King Ltd.	$283,800	$264,000 ($40 *6,600 shares)	($19,800)
Castle Ltd.	$37,160	$22,000 ($22 * 1,000 shares)	($15,160)
Total Portfolio	$890,960	$936,000	$45,040
Previous securities fair value adjustment balance- Cr.			$10,800
Securities fair value adjustments- Dr.			$55,840

D)- Preparing the adjusting entry for Proghorn on December 31, 2018:-

Date	Account Titles and Explanation	Debit	Credit
December 31, 2018	Fair Value Adjustment (Available for sale) A/c Dr.	$55,840
	Unrealized Holding Gain or Loss- Equity		$55,840

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