Question

Blue Company has the following securities in its portfolio on December 31, 2020. None of these investments are accounted for under the equity method.

Investments		Cost		Fair Value
1,500 shares of Gordon, Inc., Common		$76,900		$72,500
5,000 shares of Wallace Corp., Common		195,800		190,400
400 shares of Martin, Inc., Preferred		61,700		63,500
		$334,400		$326,400

All of the securities were purchased in 2020.
In 2021, Blue completed the following securities transactions.

March 1		Sold the 1,500 shares of Gordon, Inc., Common, @ $45 less fees of $1,200.
April 1		Bought 700 shares of Earnhart Corp., Common, @ $75 plus fees of $1,300.

Blue’s portfolio of equity securities appeared as follows on December 31, 2021.

Investments		Cost		Fair Value
5,000 shares of Wallace Corp., Common		$195,800		$190,400
700 shares of Earnhart Corp., Common		53,800		50,200
400 shares of Martin, Inc., Preferred		61,700		59,800
		$311,300		$300,400

Prepare the general journal entries for Blue Company for:

(a)		The 2020 adjusting entry.
(b)		The sale of the Gordon stock.
(c)		The purchase of the Earnhart stock.
(d)		The 2021 adjusting entry for the trading portfolio.

Answer 1

334,400 General Journal entries for 2020 Investment in the shares - Dr To Bank A/C (Being Investment in Shares of Gordan Inc, Wallace Corp, Martin Inc.) 334,400 8,000 Revaluation Account (OCI) - Dr To Investment in the shares (Being revaluation in the investment shares at year end) 8,000

Journal Entry for sale of Gordan Stock 1 67500 Bank A/C- Dr To Investment Alc (Being sale of 1500 shares of Gordan Inc. made @45 each) 67500 2 1200 Fees on sale of shares - Dr To Bank Account (Being fees on sale of shares paid) 1200 5000 Profit & Loss A/C (OCI)- Dr To Investment A/C (Being Loss on Sale of Gordon Share recognised) 5000

Journal Entry for Purchase of Earnhart Stock 1 53800 Investment in the shares - Dr To Bank A/C (Being 700 shares of Earnhart Corp bought @ 75 plus fees of 1300) 53800

1 Journal Entries in 2021 Revaluation Account (OCI) - Dr To Investment in the shares (Being revaluation in the investment shares at year end) 7300 7300

Note: We have made the journal entries on the basis of consolidated values. Alternatively, one can also make the entries for purchase and sale of each shares on the individual basis.