Question

Question on INVESTMENTS Chapter 12 Carlos company purchased stock of Bullock Corp for $1,000 on Jan 2018 However, Carlos is interested in Bullock and intends to keep the investm more than a year rather than speculate. On December 31, 2018, the ma the stock of Bullock Corp was $600. investment for rket price Required a. How should the stock of Bullock Corp be categorized? (hint: you have o ne of three categories). 3 b. What are the journal entries required on December 31,2018 to take the loss of value of Bullock stock? c. Where would the loss in value be shown? d. How would the new value of Bullock stock be shown in the Balance sheet? e. Assume the value of Bullock Corporation on Dec 31, 2019 was $500. Record the journal entries and indicate how the new value would be shown on the balance sheet f. Assume the value of Bullock Corporation on Dec 31,2020 was $800. Record the journal entries and indicate how the new value would be shown on the balance sheet 2019 lo ou bus

Answer 1

Answer:

a) The stock of Bullock Corp will be classified as Long Term Investments as it is a investment for more than a year.

b)The long-term investment may be written down to properly reflect an impaired value. However, there may not be any adjustment for temporary market fluctuations.

To treat the loss on value of shares the Journal will be:

31/03/2018 Revaluation Reserve A/c ...............Dr. $400

To Long term Investment in shares $400

c) It should shown in Reserve & Surplus.

d) In Balance Sheet the value of shares will be $ 600.

e)

To treat the loss on value of shares the Journal will be:

31/03/201p Revaluation Reserve A/c ...............Dr. $100

To Long term Investment in shares $100

In Balance Sheet the value of shares will be $ 500

f)

To treat the Profit on value of shares the Journal will be:

31/03/2020 Long term Investment in shares ...............Dr. $300

To Revaluation Reserve A/c $300

In Balance Sheet the value of shares will be $ 800