Question

1.) Rice Corporation has the following investment which was held throughout 2018–2019:

Fair Value

                                                   Cost              12/31/18             12/31/19

      Equity Investment:         $972,000         $1,281,000         $1,230,000

The equity investments is recorded using the fair value method as no ownership % is greater than 20%. What is the balance of the Fair Value Adjustment Account-Equity Investments at 12/31/2019?

(Be sure to include debit or credit in your answer for example $10,000 debit)

2.) On its December 31, 2017 balance sheet, Beans Company appropriately reported a $10,000 debit balance in its Fair Value Adjustment account. There was no change during 2018 in the composition of Bean’s portfolio of debt investments held as available-for-sale debt securities. The following information pertains to that portfolio:

Security                Cost                   Fair Value at 12/31/18

A                       $124,000                       $151,000

B                       $ 94,000                         $ 85,500

C                      $163,000                       $113,000

TOTALS:           $381,000                        $349,500

The amount of unrealized loss to appear as other comprehensive income for the year ending December 31, 2018 is…?

Answer 1

1
Equity Investment Fair Value
12/31/18	1281000	A
12/31/19	1230000	B
(A-B)	51000	Debit
2
Cost		381000
Less: Fair Value on 12/31/18		349500
		31500
The amount of unrealized loss to appear as other comprehensive income for the year ending December 31, 2018 is $31,500