Question

On December 31, 2019, Sarasota Corp. provided you with the following pre-adjustment information regarding its portfolio of investments held for short-term profit-taking:

		December 31, 2019
Investments		Carrying Amount				Fair Value
Moonstar Corp. shares			$21,000			$19,800
Bilby Corp. shares			10,500			9,400
Radius Ltd. shares			20,800			21,400
Total portfolio			$52,300			$50,600

During 2020, the Bilby Corp. shares were sold for $10,000. The fair values of the securities on December 31, 2020, were as follows: Moonstar Corp. shares $20,700 and Radius Ltd. shares $21,300. Dividends and other investment income and losses are all reported in one investment income account.

Prepare the adjusting journal entry needed on December 31, 2019.

Account Titles and Explanation	Debit	Credit
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount

Prepare the journal entry to record the sale of the Bilby Corp. shares during 2020.

Account Titles and Explanation	Debit	Credit
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount

Prepare the adjusting journal entry needed on December 31, 2020.

Account Titles and Explanation	Debit	Credit
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount

Answer 1

Adjusting Entries
Date	Account Titles and Explanation	Debit	Credit
Dec. 31, 2019	Unrealized Loss ($52,300 - $50,600)	$1,700
	Fair Value Adjustment		$1,700
	(To record the unrealized loss on total value of investments due to fair values)
Journal Entries
Date	Account Titles and Explanation	Debit	Credit
2020	Cash	$10,000
	Gain on Sale of Short-term Investments ($10,000 - $9,400)		$600
	Short-term Investments - Bibly Corp. Shares		$9,400
	(To record the sale of Bilby Corp. shares at again)
Adjusting Entries
Date	Account Titles and Explanation	Debit	Credit
Dec. 31, 2020	Fair Value Adjustment	$800
	Unrealized Gain ($50,600 - $9,400 = $41,200 - [$20,700 + $21,300])		$800
	(To record the unrealized gain on total value of investments due to fair values)