Question

Fair Value Journal Entries, Available-for-Sale Investments

Hurricane Inc. purchased a portfolio of available-for-sale securities in Year 1, its first year of operations. The cost and fair value of this portfolio on December 31, Year 1, was as follows:

Name		Number of Shares		Total Cost		Total Fair Value
Tornado Inc.		1,250		$16,750		$18,590
Tsunami Corp.		700		22,960		25,030
Typhoon Corp.		200		6,400		6,080
	Total			$46,110		$49,700

On June 12, Year 2, Hurricane purchased 600 shares of Rogue Wave Inc. at $32 per share plus a $140 brokerage commission.

a. Provide the journal entries to record the following:

1. The adjustment of the available-for-sale security portfolio to fair value on December 31, Year 1.
2. The June 12, Year 2, purchase of Rogue Wave Inc. stock.

Year 1, Dec. 31	Valuation Allowance for Available-for-Sale Investments
	Unrealized Gain (Loss) on Available-for-Sale Investments
Year 2, June 12	Investments-Rogue Wave Inc.
	Cash

Answer 1

a. Provide the journal entries to record the following:

Year 1, Dec. 31	Valuation Allowance for Available-for-Sale Investments (49700-46110)	3590
	Unrealized Gain (Loss) on Available-for-Sale Investments		3590
Year 2, June 12	Investments-Rogue Wave Inc. (600*32+140)	19340
	Cash		19340