Question
An investor purchased 50 shares of Mallard common stock at $20 per share on March 15. On December 31, the stock was quoted at $19
An investor purchased 50 shares of Mallard common stock at $20 per share on March 15. On December 31, the stock was quoted at $19 per share and Mallard declared and paid a dividend of $1.50 per share. On June 5 of the following year, the investor sold the stock for $22 per share. Assuming the investment is measured at FVNI, provide the journal entries to be made at each of the following dates. On the date of sale, first update the Fair Value Adjustment account prior to eliminating its balance in the sale entry. a. March 15, Year 1. b. December 31, Year 1. c. June 5, Year 2. Note: If a journal entry isn't required for the transaction, select "N/ADebit" and "N/ACredit" as the account names and leave the Dr. and Cr. answers blank (zero).
Date | Account Name | Debit | Credit |
---|---|---|---|
(a) Mar. 15, Year 1 | CashInterest ReceivableInvestment in TSFair Value AdjustmentTSInvestment in AFS SecuritiesFair Value AdjustmentAFSInvestment in HTM SecuritiesInvestment in StockFair Value AdjustmentEquity SecuritiesFair Value AdjustmentFair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or LossOCIUnrealized Gain or LossIncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/ADebitN/ACredit | ||
CashInterest ReceivableInvestment in TSFair Value AdjustmentTSInvestment in AFS SecuritiesFair Value AdjustmentAFSInvestment in HTM SecuritiesInvestment in StockFair Value AdjustmentEquity SecuritiesFair Value AdjustmentFair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or LossOCIUnrealized Gain or LossIncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/ADebitN/ACredit | |||
To record investment purchase. | |||
(b1) Dec. 31, Year 1 | CashInterest ReceivableInvestment in TSFair Value AdjustmentTSInvestment in AFS SecuritiesFair Value AdjustmentAFSInvestment in HTM SecuritiesInvestment in StockFair Value AdjustmentEquity SecuritiesFair Value AdjustmentFair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or LossOCIUnrealized Gain or LossIncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/ADebitN/ACredit | ||
CashInterest ReceivableInvestment in TSFair Value AdjustmentTSInvestment in AFS SecuritiesFair Value AdjustmentAFSInvestment in HTM SecuritiesInvestment in StockFair Value AdjustmentEquity SecuritiesFair Value AdjustmentFair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or LossOCIUnrealized Gain or LossIncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/ADebitN/ACredit | |||
To record dividends. | |||
(b2) Dec. 31, Year 1 | CashInterest ReceivableInvestment in TSFair Value AdjustmentTSInvestment in AFS SecuritiesFair Value AdjustmentAFSInvestment in HTM SecuritiesInvestment in StockFair Value AdjustmentEquity SecuritiesFair Value AdjustmentFair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or LossOCIUnrealized Gain or LossIncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/ADebitN/ACredit | ||
CashInterest ReceivableInvestment in TSFair Value AdjustmentTSInvestment in AFS SecuritiesFair Value AdjustmentAFSInvestment in HTM SecuritiesInvestment in StockFair Value AdjustmentEquity SecuritiesFair Value AdjustmentFair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or LossOCIUnrealized Gain or LossIncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/ADebitN/ACredit | |||
To adjust investment to fair value. | |||
(c1) June 5, Year 2 | CashInterest ReceivableInvestment in TSFair Value AdjustmentTSInvestment in AFS SecuritiesFair Value AdjustmentAFSInvestment in HTM SecuritiesInvestment in StockFair Value AdjustmentEquity SecuritiesFair Value AdjustmentFair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or LossOCIUnrealized Gain or LossIncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/ADebitN/ACredit | ||
CashInterest ReceivableInvestment in TSFair Value AdjustmentTSInvestment in AFS SecuritiesFair Value AdjustmentAFSInvestment in HTM SecuritiesInvestment in StockFair Value AdjustmentEquity SecuritiesFair Value AdjustmentFair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or LossOCIUnrealized Gain or LossIncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/ADebitN/ACredit | |||
To adjust FVA account at year-end. | |||
(c2) June 5, Year 2 | CashInterest ReceivableInvestment in TSFair Value AdjustmentTSInvestment in AFS SecuritiesFair Value AdjustmentAFSInvestment in HTM SecuritiesInvestment in StockFair Value AdjustmentEquity SecuritiesFair Value AdjustmentFair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or LossOCIUnrealized Gain or LossIncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/ADebitN/ACredit | ||
CashInterest ReceivableInvestment in TSFair Value AdjustmentTSInvestment in AFS SecuritiesFair Value AdjustmentAFSInvestment in HTM SecuritiesInvestment in StockFair Value AdjustmentEquity SecuritiesFair Value AdjustmentFair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or LossOCIUnrealized Gain or LossIncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/ADebitN/ACredit | |||
CashInterest ReceivableInvestment in TSFair Value AdjustmentTSInvestment in AFS SecuritiesFair Value AdjustmentAFSInvestment in HTM SecuritiesInvestment in StockFair Value AdjustmentEquity SecuritiesFair Value AdjustmentFair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or LossOCIUnrealized Gain or LossIncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/ADebitN/ACredit | |||
To record sale of investment. |
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