At December 31, 2010, Westport Manufacturing Co. owned the following investments in the capital stock of publicly
Question:
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In 2011, Westport engaged in the following two transactions:
Apr. 6 Sold 100 shares of its investment in Lamb Computer at a price of $55 per share, less a brokerage commission of $20.
Apr. 20 Sold 2,500 shares of its Dry Foods stock at a price of $7 per share, less a brokerage commission of $20.
At December 31, 2011, the market values of these stocks were: Lamb Computer, $40 per share;
Dry Foods, $7.
Instructions
a. Illustrate the presentation of marketable securities and the unrealized holding gain or loss in
Westport€™s balance sheet at December 31, 2010. Include a caption indicating the section of the balance sheet in which each of these accounts appears.
b. Prepare journal entries to record the transactions on April 6 and April 20.
c. Prior to making a fair value adjustment at the end of 2011, determine the unadjusted balance in the Marketable Securities controlling account and the Unrealized Holding Gain (or Loss) on Investments account. (Assume that no unrealized gains or losses have been recognized since last year.)
d. Prepare a schedule showing the cost and market values of securities owned at the end of 2011.
(Use the same format as the schedule illustrated above.)
e. Prepare the fair value adjusting entry required at December 31, 2011.
f. Illustrate the presentation of the marketable securities and unrealized holding gain (or loss) in the balance sheet at December 31, 2011. (Follow the same format as in part a. )
g. Illustrate the presentation of the net realized gains (or losses) in the 2011 income statement.
Assume a multiple-step income statement and show the caption identifying the section in which this amount would appear.
h. Explain how both the realized and the unrealized gains and losses will affect the company€™s 2011 income taxreturn.
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
a Current assets Marketable securities cost 75000 90000 Stockholders equity Unrealized holding gain ...View the full answer
Financial and Managerial Accounting the basis for business decisions
ISBN: 978-0078111044
16th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello
