Question

Pearl Company has the following portfolio of investment securities at September 30, 2020, its most recent reporting date. Investment Securities Cost Fair Value Horton, Inc. common (4,800 shares) $206,400 $190,060 Monty, Inc. preferred (3,430 shares) 126,910 133,740 Oakwood Corp. common (1,020 shares) 179,520 178,470 On October 10, 2020, the Horton shares were sold at a price of $54 per share. In addition, 3,090 shares of Patriot common stock were acquired at $56 per share on November 2, 2020. The December 31, 2020, fair values were Monty $98,150, Patriot $143,360, and Oakwood $193,270. Prepare the journal entries to record the sale, purchase, and adjusting entries related to the equity securities in the last quarter of 2020. (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.)

Pearl Company has the following portfolio of investment securities at September 30, 2020, its most recent reporting date. Cost Investment Securities Horton, Inc. common (4,800 shares) Monty, Inc. preferred (3,430 shares) Oakwood Corp. common (1,020 shares) $206,400 126,910 179,520 Fair Value $190,060 133,740 178,470 On October 10, 2020, the Horton shares were sold at a price of $54 per share. In addition, 3,090 shares of Patriot common stock were acquired at $56 per share on November 2, 2020. The December 31, 2020, fair values were Monty $98,150, Patriot $143,360, and Oakwood $193,270. Prepare the journal entries to record the sale, purchase, and adjusting entries related to the equity securities in the last quarter of 2020. (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

Answer 1

Answer:

Date	Particulars	Debit ($)	Credit ($)
Oct-10	Cash (54*4800 shares)	259200
	Equity Investment / Investment in Trading Securities		206400
	Gain on Sale of Equity Investments (259200-206400)		52800
	(To record the gain on sale of equity investments)
Nov-02	Equity Investments (56*3090 shares)	173040
	Cash		173040
	(To record the additional shares acquired)
Dec-31	Unrealized holding loss	34130
	Fair value adjustment		34130

Working Notes:

Computation of Unrealized holding loss on September 30, 2020

Investment Securities	Cost	Fair value	Unrealized Holding Gain (Fair value - Cost)
Horton Inc. Common	206400	190060	(16340)
Monty Inc. Preferred	126910	133740	6830
Oakwood Corp. Common	179520	178470	(1050)
Total	512830	502270	(10560)

Computation of Unrealized Holding Loss on December 31, 2020

Investment Securities	Cost	Fair value	Unrealized Holding Gain (Fair value - Cost)
Monty Inc. Preferred	126910	98150	(28760)
Oakwood Corp. Common	179520	193270	13750
Patriot Common	173040	143360	(29680)
Total	479470	434780	(44690)

Therefore Fair value Adjustment Required on December 31, 2020 is (44690-10560) = 34130