Question

Common Stock	$65,000
Treasury Stock (at cost)	$13,400
Paid-in-Capital in Excess of Par	$82,000
Investments in AFS Equity Securities	$40,000
FVA (AFS)	$2,500 credit
Retained Earnings	$22,000

On that date, the Accumulated OCI account was at its appropriate balance.

There were no sales or purchases of Common Stock or Investments during 2018. Prior to any adjusting journal entries related to the Investments, 2018 Net Income was $10,300. No other transactions affecting Retained Earnings occurred. Fair Value of the Investments at 12/31/18 was $41,500.

Required:

(a)    Prepare the 12/31/18 journal entry to adjust the investment to fair value.

(b)    Prepare the 12/31/18 Equity section of the balance sheet.

Answer 1

ANSWER :-

(a)

journal entry
Date	Particulars	Debit	Credit
12/31/18	FVA (AFS)	= $41,500 - $40,000 - $2,500 = $1,000
	Unrealized gain on AFS securities		$1,000

(b)

Particulars	Amount
Stockholder equity :-
Common stock	$65,000
Paid in capital in excess of par	$82,000
Total paid in capital	65,000 + 82,000 $147,000
Retained earnings	$22,000 + $10,300 $32,300
Accumulated other comprehensive income	1,000 - 2,500 $1,500
Treasury stock ( at cost )	$13,400
Stockholder equity ending balance	[ $147,000+ $32,300 + $1,500 ] - $13,400 = 180,800- 13,400 $ 167,400

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