Question

Sunland 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		$79,600		$74,700
5,000 shares of Wallace Corp., Common		170,900		165,800
400 shares of Martin, Inc., Preferred		65,800		67,200
		$316,300		$307,700

All of the securities were purchased in 2020.
In 2021, Sunland 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.

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

Investments		Cost		Fair Value
5,000 shares of Wallace Corp., Common		$170,900		$165,800
700 shares of Earnhart Corp., Common		53,800		50,000
400 shares of Martin, Inc., Preferred		65,800		64,000
		$290,500		$279,800

Prepare the general journal entries for Sunland 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.

No. Account Titles and Explanation Debit Credit

Answer 1

Credit Debit $ 8,600 No Account Titles and Explanation (a) Unrealized Holding Gain or Loss - income Fair value adjustment (Trading) (being unrealised loss recorded) $ 8,600 $ 66,300 $ 13,300 Cash Loss on sale of investments Equity Investments (Trading) (Being equity investments sold recorded) $ 79,600 $ 53,800 (C) Equity Investments (Trading) Cash (Being equity Investments purchased recorded) $ 53,800 $ 2,100 (d) (Unrealized Holding Gain or Loss - income Fair value adjustment (Trading) (Being unrealised loss recorded) $ 2,100 Working notes: Investments 1,500 shares of Gordon, Inc., Common 5,000 shares of Wallace Corp., Common |400 shares of Martin, Inc., Preferred Fair Value adjustment -Cr Cost $ 79,600 $ 170,900 $ 65,800 Fair Value Unrealized Gain(Loss $ 74,700 $ (4,900) $ 165,800 $ (5,100) $ 67,200 $ 1,400 S (8,600)

(6) Equity investments = $79,600 Cash = (1500*$45)-$1,200 = $66,300 Loss on sale of Investments = $79,600-$66,300 = $13,300 (c) Equity Investments (Trading) = (700*$75)+$1,300 = $53,800 (d) Investments 5,000 shares of Wallace Corp., Common 700 shares of Earnhart Corp., Common 400 shares of Martin, Inc., Preferred Total portfolio Previous fair value adjustment -Cr Fair Value adjustment -Cr Cost Fair Value $ 170,900 $ 165,800 $ 53,800 $ 50,000 $ 65,800 $ 64,000 $ 290,500 $ 279,800 Unrealized Gain(Loss $ (5,100) (3,800) (1,800) (10,700) (8,600) (2,100)