The accounting records of Jamaican Importers, Inc., at January 1, 2018, included the following: Assets: Investment in IBM common shares $ 2,045,000 Less: Fair value adjustment (215,000 ) $ 1,830,000 No changes occurred during 2018 in the investment portfolio. Required: Prepare appropriate adjusting entry(s) at December 31, 2018, assuming the fair value of the IBM common shares was: $1,373,000 $1,860,000 $2,075,000 (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
1.
Loss during Fair value Adjustment = Fair Value – Investment
= $1,373,000 - $2,045,000
= $672,000
There is already a reserve for 215,000 so we need to create additional 457,000 reserve.
Investment in IBM common shares $2,045,000
Less: Fair value adjustment ($672,000)
$1,373,000
Entry:
Accumulated Unrealized holding Losses and Gains Dr. 457,000
Fair Value Adjustment 457,000
2.
Loss during Fair value Adjustment = Fair Value – Investment
= $1,860,000 - $2,045,000
= $185,000
There is already a reserve for 215,000 so we need to decrease reserve by 30,000
Investment in IBM common shares $2,045,000
Less: Fair value adjustment (185,000)
$1,860,000
Entry:
Fair Value Adjustment Dr. 30,000
Accumulated Unrealized holding Losses and Gains 30,000
3.
Profit during Fair value Adjustment = Fair Value – Investment
= $2,075,000 - $2,045,000
= $30,000
There is already a reserve for 215,000 so we need to decrease the fund by 245,000 (215,000 + 30,000). So that profit of 30,000 can re recorded.
Investment in IBM common shares $2,045,000
Add: Fair value adjustment $30,000
$2,075,000
Entry:
Fair Value Adjustment Dr. 245,000
Accumulated Unrealized holding Losses and Gains 245,000
The accounting records of Jamaican Importers, Inc., at January 1, 2018, included the following: Assets: Investment...
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