Question

46.

Storm, Inc. purchased the following available-for-sale securities during Year 1, its first year of operations:

Name	Number of Shares	Cost
Dust Devil, Inc.	1,880	$80,840
Gale Co.	800	64,000
Whirlwind Co.	2,850	111,150
Total		$255,990 The market price per share for the available-for-sale security portfolio on December 31, Year 1, was as follows: Market Price per Share, Dec. 31, Year 1 Dust Devil, Inc. $39 Gale Co. 75 Whirlwind Co. 41 Required: A. Provide the journal entry to adjust the available-for-sale security portfolio to fair value on December 31, Year 1. Refer to the Chart of Accounts for exact wording of account titles. B. Describe the income statement impact from the December 31, Year 1, journal entry.

A. Provide the journal entry to adjust the available-for-sale security portfolio to fair value on December 31, Year 1. Refer to the Chart of Accounts for exact wording of account titles.

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JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1		Adjusting Entries
2
3

B. Describe the income statement impact from the December 31, Year 1, journal entry.

There --------- income statement impact from the December 31, Year 1, adjusting entry. Unrealized Gain (Loss) on Available-for-Sale Investments is reported in the -------------- .

On December 31, Year 1, Unrealized Gain or Loss on Available-for-Sale Investments would be disclosed as follows (if a loss, use a minus sign): ---------------

Unrealized gain (loss) on available-for-sale investments:

Answer 1

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Storm, Inc.
Calculation of fair value of investment
Shares	Number	Price per share	Fair value
Dust Devil, Inc.	1,880.00	39.00	73,320.00
Gale Co.	800.00	75.00	60,000.00
Whirlwind Co.	2,850.00	41.00	116,850.00
Answer a
Schedule of cost and fair value of the portfolio at the end of Dec 31, Year 1.
$//img.homeworklib.com/questions/b2883e30-12c0-11ea-98b1-fb5b0a3d66ab.gif?x-oss-process=image/resize,w_560$ Investment	Cost	Fair value	Unrealized Gain/(Loss)
Dust Devil, Inc.	80,840.00	73,320.00	(7,520.00)
Gale Co.	64,000.00	60,000.00	(4,000.00)
Whirlwind Co.	111,150.00	116,850.00	5,700.00
Net Impact			(5,820.00)
Answer b	Journal Entry
$//img.homeworklib.com/questions/b2883e30-12c0-11ea-98b1-fb5b0a3d66ab.gif?x-oss-process=image/resize,w_560$ Date	Account	Debit $	Credit $	It will impact Equity.
Dec 31	Unrealized Loss	7,520.00
	Investment in Dust Devil, Inc.		7,520.00
$//img.homeworklib.com/questions/b2883e30-12c0-11ea-98b1-fb5b0a3d66ab.gif?x-oss-process=image/resize,w_560$ Dec 31	Unrealized Loss	4,000.00
	Investment in Gale Co.		4,000.00
$//img.homeworklib.com/questions/b2883e30-12c0-11ea-98b1-fb5b0a3d66ab.gif?x-oss-process=image/resize,w_560$ Dec 31	Investment in Whirlwind Co.	5,700.00
$//img.homeworklib.com/questions/b2883e30-12c0-11ea-98b1-fb5b0a3d66ab.gif?x-oss-process=image/resize,w_560$	Unrealized Gain		5,700.00
Unrealized loss on available-for-sale investments: $ 5,820.