Question

The accounting records of Jamaican Importers, Inc., at January 1, 2021, included the following:

Assets:
Investment in IBM common shares	$	2,245,000
Less: Fair value adjustment		(235,000	)
	$	2,010,000

No changes occurred during 2021 in the investment portfolio.

Required:
1. Prepare appropriate adjusting entry(s) at December 31, 2021, assuming the fair value of the IBM common shares was: $1,429,000 (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Record the fair value adjustment assuming the fair value of the IBM common shares was $1,429,000.

2. Prepare appropriate adjusting entry(s) at December 31, 2021, assuming the fair value of the IBM common shares was: $2,032,000 (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Record the fair value adjustment assuming the fair value of the IBM common shares was $2,032,000.

3. Prepare appropriate adjusting entry(s) at December 31, 2021, assuming the fair value of the IBM common shares was: $2,260,000 (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Record the fair value adjustment assuming the fair value of the IBM common shares was $2,260,000.

Answer 1

No	Date	General Journal	Debit	Credit
1	December 31, 2021	Unrealized holding gain or loss	581000
		Fair value adjustment		581000
		(To record the fair value adjustment)
2	December 31, 2021	Fair value adjustment	22000
		Unrealized holding gain or loss		22000
		(To record the fair value adjustment)
3	December 31, 2021	Fair value adjustment	250000
		Unrealized holding gain or loss		250000
		(To record the fair value adjustment)

Working:

	1	2	3
Investment (at cost)	2245000	2245000	2245000
Fair value on December 31, 2021	1429000	2032000	2260000
Fair value adjustment required	816000	213000	15000
	credit	credit	debit
Existing balance (credit)	235000	235000	235000
Adjustment required	581000	22000	250000
	credit	debit	debit