Information regarding Carperk Company's individual investments
in securities during its calendar-year 2017, along with the
December 31, 2017, fair values, follows.
- Investment in Brava Company bonds: $314,200 cost, $341,535 fair
value. Carperk intends to hold these bonds until they mature in
2022.
- Investment in Baybridge common stock: 29,500 shares; $249,789
cost; $271,521 fair value. Carperk owns 32% of Baybridge's voting
stock and has a significant influence over Baybridge.
- Investment in Buffa common stock: 12,000 shares; $128,822 cost;
$138,870 fair value. This investment amounts to 3% of Buffa’s
outstanding shares, and Carperk’s goal with this investment is to
earn dividends over the next few years.
- Investment in Newton common stock: 3,500 shares; $71,638 cost;
$70,420 fair value. Carperk’s goal with this investment is to reap
an increase in fair value of the stock over the next three to five
years. Newton has 30,000 common shares outstanding.
- Investment in Farmers common stock: 16,300 shares; $78,550
cost; $83,420 fair value. This stock is marketable and is held as
an investment of cash available for operations.
Required:
1. Identify whether each investment should be
classified as a short-term or long-term investment. For each
long-term investment, indicate in which of the long-term investment
classifications it should be placed.
2. Prepare a journal entry dated December 31,
2017, to record the fair value adjustment of the long-term
investments in available-for-sale securities. Carperk had no
long-term investments prior to year 2017.
| Type of Investment |
Classification of Long-term
Investment |
| a. |
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| b. |
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| c. |
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| d. |
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| e. |
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- Record the fair value adjustment of the long-term investments
in available-for-sale securities for Dec 31,2017. Carperk had no
long-term investments prior to year 2017.
Note: Enter debits before credits.
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| Date |
General Journal |
Debit |
Credit |
| Dec 31 |
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