Question

*Exercise 17-11 Weterway Curpuration made the following cesh purchases of securities during 2017, which is the first year in which Waterwey invested in securities. 1. On January 15, purchased 10,180 shares of Sanchez Campany's common stock at $46.90 per share plus commission $2,160. 2. On April 1, purchased 5,180 shares of Vicaria Co.'s common stock at $72.80 par share plus commission $3,550. 3. On September 10, purchased 7,180 shares of WTA Co.'s preferred stock at $37.10 per share plus commission $5,090. On May 20, 2017, Waterway sold 1,100 shares of Sanchez Cumpany's common stock at market price of $49 per share less brokerage commissions, taxes, and fees of $4,030. The year-end fair values per share were Sanchez $ 12, Vicario $77, and WTA $39.20. In addition, the chief accountant of Water way told you that the corporation plans to hold these securities for the long-term but may sell them in order to earn profits from appreciation in prices. The equity method of accounting is not aporopriate for these stock purchases. Prepare the journal entries to record the above three security purchases. (Round answers to O decimal places, e.g. 2,500. 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 o for the amounts.) No. Date Account Titles and Explanation Debit Credit Prepare the journal entry for the security sale on May 20. (Round answers to o decimal places, e.g. 2,500. 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 for the amounts.) Debit Credit Date Account Tities and Explanation May 20, 2017 Compute the unrealized gains or losses. (Round answer to o decimal places, e.g. 2,500.) Unrealized Prepare the adjusting entries for Waterway on December 31, 2017. (Round answers to o decimal places, c.g. 2,500. 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 o for the amounts.) Debit Credit Date Account Titles and Explanation Dec 31, 2017

Answer 1

Date	Accounts	Debit	Credit
Jan 15 2017	Investment in shares of Sanchez	479,602
	Cash		479,602
(Being purcahse of 10180 shared @ 46.90 per share and incurred commission of 2160)
Apr 1 2017	Investment in shares of Vicario Co	380,654
	Cash		380,654
(Being purcahse of 5180 shared @ 72.80 per share and incurred commission of 3500)
Sep 10 2017	Investment in shares of WTA Co	271,468
	Cash		271,468
(Being purcahse of 7180 shared @ 37.10 per share and incurred commission of 3500)
May 20 2017	Cash	200,790
	Investment in shares of Sanchez		196,929
	Gain on Investment		3,861
(Being Sale of 4180 shares)

Calculation of unrealised gain / loss :

Qty	Investment	Cost	Fair value	Unrealised
6000	Investment in shares of Sanchez	47.11	42.00	(30,673.08)
5180	Investment in shares of Vicario Co	73.49	77.00	18,206.00
7180	Investment in shares of WTA Co	37.81	39.20	9,988.00
Total unrealised loss				-2479

Journal entry for accounting of unrealised gain /loss :

As per US gaap this is classifiable as investment held for sale. They are not investment held for maturity and also not to be sold within 3 month which is classified as investment for trading. The unrealised gain/loss is accounted to comprehensive income :

Date	Accounts	Debit	Credit
Dec 31 2017	Accumulated Other Comprehensive Income	2479.08448
	Asset account Available-for-Sale Securities		2479.08448
(Accounting of unrealised loss for investment available for sale)