Adjustment (Trading) at December 31, 2011 (after the adjusting entry for 2011 is made).(b)Prepare a schedule which shows the aggregate cost and fair values for Perez's trading securities portfolio at 12/31/12.(c)Prepare the necessary adjusting entry based upon your analysis in (b) above. Solution 17-130
Pr. 17-131—Available-for-sale equity securities.During the course of your examination of the financial statements of Doppler Corporation for the year ended December 31, 2010, you found a new account, "Investments." Your examination revealed that during 2010, Doppler began a program of investments, and all investment-related transactions were entered in this account. Your analysis of this account for 2010 follows:Doppler CorporationAnalysis of InvestmentsFor the Year Ended December 31, 2010Date—2010DebitCredit(a)Harmon Company Common StockFeb. 14Purchased 4,000 shares @ $55 per share.$220,000July26Received 400 shares of Harmon Company common stock as a stock dividend. (Memorandum entry in general ledger.)Sept. 28Sold the 400 shares of Harmon Company common stock received July 26 @ $70 per share.$28,000(b)DebitCreditTaber Inc., Common StockApr.30Purchased 20,000 shares @ $40 per share.$800,000Oct.28Received dividend of $1.20 per share.$24,000Additional information:1.The fair value for each security as of the 2010 date of each transaction follow:SecurityFeb. 14Apr. 30July 26Sept. 28Dec. 31Harmon Co.$55$62$70$74Taber Inc.$4032Doppler Corp.25 283033 352.All of the investments of Doppler are nominal in respect to percentage of ownership (5% or less).3.Each investment is considered by Doppler’s management to be available-for-sale.
Instructions(1)Prepare any necessary correcting journal entries related to investments (a) and (b).(2)Prepare the entry, if necessary, to record the proper valuation of the available-for-sale equity security portfolio as of December 31, 2010. Solution 17-131 (1) (a) Harmon — original purchase 4,000 shares stock dividend 400 shares total holding 4,400 shares Total cost of $220,000 ÷ Total shares of 4,400 = $50 cost per share Solution 17-131 (cont.) Sold 100 shares Correct entry: Cash (400 × $70) 28,000 Available-for-Sale Securities 20,000 Gain on Sale of Securities 8,000 Entry made: Cash 28,000 Available-for-Sale Securities 28,000 Correction: Available-for-Sale Securities 8,000 Gain on Sale of Securities 8,000 (b) Taber—should record cash dividend as dividend income. Correct entry: Cash 24,000 Dividend Revenue 24,000 Entry made: Cash 24,000 Available-for-Sale Securities 24,000 Correction: Available-for-Sale Securities 24,000 Dividend Revenue 24,000 (To properly record dividends under fair value
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- unrealized holding gain, Available-for-Sale Securities