Question

Problem 17-5

Crane Company has the following securities in its investment portfolio on December 31, 2017 (all securities were purchased in 2017): (1) 3,100 shares of Anderson Co. common stock which cost $58,900, (2) 9,900 shares of Munter Ltd. common stock which cost $564,300, and (3) 5,600 shares of King Company preferred stock which cost $229,600. The Fair Value Adjustment account shows a credit of $10,500 at the end of 2017.

In 2018, Crane completed the following securities transactions.

1. On January 15, sold 3,100 shares of Anderson’s common stock at $23 per share less fees of $2,300.

2. On April 17, purchased 1,000 shares of Castle’s common stock at $33 per share plus fees of $2,020.

On December 31, 2018, the market prices per share of these securities were Munter $63, King $40, and Castle $20. In addition, the accounting supervisor of Crane told you that, even though all these securities have readily determinable fair values, Crane will not actively trade these securities because the top management intends to hold them for more than one year.

Prepare the entry for the security sale on January 15, 2018. (Credit account titles are automatically inder account titles and enter 0 for the amounts.) Debit Credit Date Account Titles and Explanation Jan. 15, 2018 Prepare the journal entry to record the security purchase on April 17, 2018. (Credit account titles are automa Entry" for the account titles and enter o for the amounts.) Debit Credit Date Account Titles and Explanation Apr. 17, 2018 Compute the unrealized gains or losses. Unrealized Prepare the adjusting entry for Crane on December 31, 2018. (Credit account titles are automatically indented account titles and enter o for the amounts.) Debit Credit Date Account Titles and Explanation Dec 31, 2018

Answer 1

Part A

Date	Account titles and explanation	Debit	Credit
Jan. 15, 2018	Cash (3100*23)-2300	69000
	Equity Investments (Available-for-Sale)		58900
	Gain on Sale of Stock		10100
	(To record sale of shares.)

Part B

Date	Account titles and explanation	Debit	Credit
Apr 17, 2018	Equity Investments (Available-for-Sale) (1000*33)+2020	35020
	Cash		35020

Part C

Available-for-Sale Portfolio—December 31, 2018

Securities	Cost	Fair value	Gain (loss) (fair value – carrying amount)
Munter Ltd. (9900 shares)	564300	623700 (9900*63)	59400
King Corp. (5600 shares)	229600	224000 (5600*40)	(5600)
Castle Ltd. (1000 shares)	35020	20000 (1000*20)	(15020)
	828920	867700	38780
Previous securities fair value adjustment balance—Cr.			(10500)
Securities fair value adjustment—Dr.			28280

Date	Account titles and explanation	Debit	Credit
Dec 31, 2018	Fair Value Adjustment (Available-for-Sale)	28280
	Unrealized Holding Gain or Loss—Equity		28280