Question

Recognizing Fair Value and the Balance Sheet Presentation of Investments Stewart Corporation's trading portfolio of stock investments consisted of the following at December 31, 2017: Stock Number of Shares Cost Conn Common Stock 100 $14,000 Ares Preferred Stock 400 6,000 Hall Common Stock 275 8,250 Pall Common Stock 50 3,000 $31,250 At year end on December 31, 2017, the fair values per share were: Fair Value Per Share Conn Common Stock $158 Ares Preferred Stock $14 Hall Common Stock $24 Pall Common Stock $62 INSTRUCTIONS:: (1) On December 31, 2017, prepare any adjusting entry that might be necessary relative to the trading portfolio. (2) Prepare a partial balance sheet for stewart corporation's showing how the portfolio of investment will be reported (valued) at december 31, 2017

Answer 1

1.

Calculate the unrealized loss as follows:

Stock	Cost	Fair value
Conn Common Stock	14000	(100 x 158) =	15800
Ares Preferred Stock	6000	(400 x 14) =	5600
Hall Common Stock	8250	(275 x 24) =	6600
Pall Common Stock	3000	(50 x 62) =	3100
Total	31250		31100
Unrealized loss = 31,250 - 31,100 = 150

Prepare the adjusting entry that is necessary relative to the trading portfolio as follows:

Date	Account Titles	Debit	Credit
Dec. 31, 2017	Unrealized loss - Income	150
	Fair value adjustment - Trading		150

2.

Prepare a partial balance sheet for Stewart corporation as follows:

Stewart Corporation
Balance Sheet (Partial)
December 31, 2017
Assets
Current Assets:
Short-term investments at fair value	31100