Question

Swifty Company has the following securities in its investment portfolio on December 31, 2017 (all securities were purchased in 2017): (1) 2,900 shares of Anderson Co. common stock which cost $52,200, (2) 10,600 shares of Munter Ltd. common stock which cost $614,800, and (3) 6,400 shares of King Company preferred stock which cost $262,400. The Fair Value Adjustment account shows a credit of $9,900 at the end of 2017.

In 2018, Swifty completed the following securities transactions.

1.		On January 15, sold 2,900 shares of Anderson’s common stock at $22 per share less fees of $2,270.
2.		On April 17, purchased 900 shares of Castle’s common stock at $32 per share plus fees of $1,920.

On December 31, 2018, the market prices per share of these securities were Munter $60, King $40, and Castle $21. In addition, the accounting supervisor of Swifty told you that, even though all these securities have readily determinable fair values, Swifty will not actively trade these securities because the top management intends to hold them for more than one year. Prepare the entry for the security sale on January 15, 2018  

Answer 1

The Journal Entry of sale would be:-

1.) Bank Account Dr.    61,530     (2,900*22 - 2,270)

         To Investment in Shares A/c     52,200

          To Profit on Sale A/c              9,330

2.) Profit on Sale A/c Dr.    9,330

          To Statement of profit & Loss A/c     9,330