Question

On December 21, 2020, Coronado Company provided you with the following information regarding its equity investments.

December 31, 2020
Investments (Trading)		Cost		Fair Value		Unrealized Gain (Loss)
Clemson Corp. stock		$19,300		$18,200		$(1,100	)
Colorado Co. stock		10,400		9,400		(1,000	)
Buffaloes Co. stock		19,300		19,930		630
Total of portfolio		$49,000		$47,530		(1,470	)
Previous fair value adjustment balance						0
Fair value adjustment—Cr.						$(1,470	)

During 2021, Colorado Co. stock was sold for $9,910. The fair value of the stock on December 31, 2021, was Clemson Corp. stock—$18,310; Buffaloes Co. stock—$19,830. None of the equity investments result in significant influence.

(a)		Prepare the adjusting journal entry needed on December 31, 2020.
(b)		Prepare the journal entry to record the sale of the Colorado Co. stock during 2021.
(c)		Prepare the adjusting journal entry needed on December 31, 2021.

Answer 1

Credit Debit 1,470 $ No Account Titles and Explanation (a) Unrealized Holding Gain or Loss - Equity Fair value adjustment (To Adjust to Fair Value for 2020) $ 1.470 (6) $ $ 9,910 490 Cash Loss on sale of investment Equity Investment (To Record Sale of Stock) $ 10,400 $ 1.010 (a) Fair value adjustment Unrealized Holding Gain or Loss - Equity (To Adjust to Fair Value for 2021) $ 1,010 Working notes: (6) Loss on sale of Investments = $10,400-$9,910 = $490 Investments Cost Fair Value Unrealized Gain(Loss Clemson Corp. stock $ 19,300 $ 18,310 S (990) Buffaloes Co. stock $ 19,300 S 19.830 S 530 Total portfolio S 38.600 S 38.140 S (460) Previous fair value adjustment - Cr 1,470 Fair Value adjustment -Cr 1,010