Question

Cheyenne Company has the following portfolio of investment securities at September 30, 2020, its most recent reporting date.

Investment Securities		Cost		Fair Value
Horton, Inc. common (5,180 shares)		$212,380		$197,710
Monty, Inc. preferred (3,170 shares)		123,630		131,310
Oakwood Corp. common (980 shares)		164,640		163,690

On October 10, 2020, the Horton shares were sold at a price of $54 per share. In addition, 2,820 shares of Patriot common stock were acquired at $56 per share on November 2, 2020. The December 31, 2020, fair values were Monty $96,040, Patriot $129,060, and Oakwood $178,760.

Prepare the journal entries to record the sale, purchase, and adjusting entries related to the equity securities in the last quarter of 2020.

Date	Account Titles and Explanation	Debit	Credit
Oct. 10, 2020Nov. 2, 2020Dec. 31, 2020
Oct. 10, 2020Nov. 2, 2020Dec. 31, 2020
Oct. 10, 2020Nov. 2, 2020Dec. 31, 2020

Answer 1

Journal entries

Date	Accounts titles and explination	Debit	Credit
Oct 10	Cash (5,180×$54)	$279,720
	Equity investment		$212,380
	Gainon sale of equity investment		$67,340
Nov 2	Equity investment	$157,920
	Cash (2,820×$56)		$157,920
Dec 31	Unrealised holding ($42,330-$7,940)	$34,390
	Fair value Adjustment		$34,390

Working notes:

On sep 30

Investment securities	Cost	Fair	Unrealised gain (loss)
Horton inc	$212,380	$197,710	($14,670)
Monty Inc	$123,630	$131,310	$7,680
Oakwood corp inc	$164,640	$163,690	($950)
Total			($7,940)

On Dec 31

Investment securities	Cost	Fair	Total
Monty Inc	$123,630	$96,040	($27,590)
Oakwood corp inc	$164,640	$178,760	$14120
Patriot	$157,920	$129,060	($28,860)
Total			($42,330)