Question

View Policies Current Attempt in Progress Cullumber Company has the following portfolio of investment securities at September 30, 2020, its most recent reporting date. Investment Securities Horton, Inc. common (5,500 shares) Monty, Inc. preferred (3,830 shares) Oakwood Corp.common (980 shares) Cost $236,500 141,710 179,340 Fair Value $221,790 149,280 178,430 On October 10, 2020, the Horton shares were sold at a price of $52 per share. In addition, 3,170 shares of Patriot common stock were acquired at $53 per share on November 2, 2020. The December 31, 2020, fair values were Monty $114,850, Patriot $137,740, and Oakwood $191,080. Prepare the journal entries to record the sale, purchase, and adjusting entries related to the equity securities in the last quarter of 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts.) Date Account Titles and Explanation Debit Credit

Answer 1

Answer with working notes is given below

Date Oct 10 2020 Debit $286,000 General Journal Cash To Equity Investment To gain on sale of equity investment (To record sale of equity investment) Credit (5,500* $52) $236,500 $49,500 Nov 2 2020 $168,010 Equity investment To Cash (To record sale of equity investment) (3,170* $53) $168,010 $37,340 Dec 31 2020 Unrealised holding loss To Fair value adjustment (To record fair value adjustment) As per working below $37,340 Working note: September 30, 2020 Unrealised holding gain (loss) Cost Fair value Horton Inc. Common Monty Inc. Preferred Oakwood Corp Common $236,500 $141,710 $179,340) $557,550 $221,790 $149,280 $178,430 $549,500 Unrealised holding gain(Loss) -$14,7101 $7,570 -$910 $8,050 Total Opening balance of Fair value adjustment account will have credit balance of $8,050 December 31, 2020 Unrealised holding gain (loss) Cost Fair value Monty Inc. Preferred Oakwood Corp Common Patriot Common Total $141,710 $179,340 $168,010 $489,060 $114,850 $191,080 $137,740 $443,670 Unrealised holding gain(Loss) - $26,860 $11,740 -$30,270 $45,390 Year end balance of Fair value adjustment account should have credit of $45,390 Therefore entry is passed for differential as per below working September 30, 2020 Unrealised holding gain (loss) December 31, 2020 Unrealised holding gain (loss) Difference - adjustment entry for December 31, 2020 $8,050 $45,390 $37,340