Question

Whispering Company has the following securities in its investment portfolio on December 31, 2017 (all securities were purchased in 2017): (1) 3,000 shares of Anderson Co. common stock which cost $54,000, (2) 10,700 shares of Munter Ltd. common stock which cost $620,600, and (3) 6,400 shares of King Company preferred stock which cost $268,800. The Fair Value Adjustment account shows a credit of $10,200 at the end of 2017. In 2018, Whispering completed the following securities transactions.

1. On January 15, sold 3,000 shares of Anderson’s common stock at $22 per share less fees of $1,990.

2. On April 17, purchased 1,000 shares of Castle’s common stock at $35 per share plus fees of $1,980.

Compute the unrealized gains or losses.

Unrealized GainLoss

$

Prepare the adjusting entry for Whispering on December 31, 2018. (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 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31, 2018

Answer 1

Unrealised gains on Anderson's common stock

Cost is 54000÷3000=18 per stock

Sold 3000 nos for 22 + fees of 1990, that is

3000*22+1990=$67990

The profit from this transaction is = 67990-54000= 13990

Out of which fair value adjustment account shows 10200

Therefore unrealised gain is 13990-10200=$3790

Adjusting entry for wispering for unrealised gain

By cash a/c dr. $67990

To investment in Anderson co. A/c cr $54000

To. Profit on sale of investment a/c. Cr. $13990

By fair value adjustment a/c. Dr. $10200

To profit on sale of investment a/c. Cr. $10200