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Problem 15-5A Long-term investment transactions; unrealized and realized gains and losses LO C2, P3, P4

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Stoll Co.’s long-term available-for-sale portfolio at December 31, 2016, consists of the following.

Available-for-Sale Securities	Cost			Fair Value
45,000 shares of Company A common stock	$	1,031,600		$	910,000
12,000 shares of Company B common stock		322,750			312,000
26,000 shares of Company C common stock		1,332,500			1,287,875

Stoll enters into the following long-term investment transactions during year 2017.

Jan.		29		Sold 6,000 shares of Company B common stock for $160,375 less a brokerage fee of $2,600.
Apr.		17		Purchased 20,000 shares of Company W common stock for $405,000 plus a brokerage fee of $2,300. The shares represent a 30% ownership in Company W.
July		6		Purchased 9,000 shares of Company X common stock for $254,125 plus a brokerage fee of $2,300. The shares represent a 10% ownership in Company X.
Aug.		22		Purchased 100,000 shares of Company Y common stock for $510,000 plus a brokerage fee of $7,100. The shares represent a 51% ownership in Company Y.
Nov.		13		Purchased 13,000 shares of Company Z common stock for $532,800 plus a brokerage fee of $5,100. The shares represent a 5% ownership in Company Z.
Dec.		9		Sold 45,000 shares of Company A common stock for $1,022,000 less a brokerage fee of $4,100.

The fair values of its investments at December 31, 2017, are: B, $163,750; C, $1,221,625; W, $383,500; X, $237,250; Y, $1,063,500; and Z, 558,600.

Problem 15-5A Part 1 and 2

Required:
1. Determine the amount Stoll should report on its December 31, 2017, balance sheet for its long-term investments in available-for-sale securities.
2. Prepare any necessary December 31, 2017, adjusting entry to record the fair value adjustment for the long-term investments in available-for-sale securities.

Question 6 linked to 7 of 7 Total 6 7 of 7

1

Prepare any necessary December 31, 2017, adjusting entry to record the fair value adjustment for the long-term investments in available-for-sale securities.

Fair Value Adjustment Computation - Available-for-Sale Securities
December 31, 2017 AFS Securities	# of shares	Cost	Fair Value	Unrealized Amount
Company B common stock	6,000		$163,750
Company C common stock	26,000		1,221,625
Company X common stock	9,000		237,250
Company Z common stock	13,000		558,600
Total		$0	$2,181,225
-1
-1
-1

Required 2

Prepare any necessary December 31, 2017, adjusting entry to record the fair value adjustment for the long-term investments in available-for-sale securities.

Journal entry worksheet

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
Dec 31

3. What amount of gains or losses on transactions relating to long-term investments in available-for-sale securities should Stoll report on its December 31, 2017, income statement?

Answer 1