Fair Value Journal Entries, Available-for-Sale Investments

The investments of Steelers Inc. include a single investment: 10,400 shares of Bengals Inc. common stock purchased on September 12, Year 1, for $14 per share including brokerage commission. These shares were classified as available-for-sale securities. As of the December 31, Year 1, balance sheet date, the share price declined to $11 per share.

a. Journalize the entries to acquire the investment on September 12 and record the adjustment to fair value on December 31, Year 1.

Year 1 Sept. 12	Investments-Bengals Inc. Stock	fill in the blank feee46fbc07805f_2
	Cash		fill in the blank feee46fbc07805f_4
Year 1 Dec. 31	Unrealized Gain (Loss) on Available-for-Sale Investments	fill in the blank feee46fbc07805f_6
	Valuation Allowance for Available-for-Sale Investments		fill in the blank feee46fbc07805f_8

b. How is the unrealized gain or loss for available-for-sale investments disclosed on the financial statements?

Unrealized Gain (Loss) on Available-for-Sale Investments is reported in the Other income(loss) of the income statement .

Fair Value Journal Entries, Trading Investments

Gruden Bancorp Inc. purchased a portfolio of trading securities during Year 1. The cost and fair value of this portfolio on December 31, Year 1, was as follows:

Name		Number of Shares		Total Cost		Total Fair Value
Griffin Inc.		1,200		$16,080		$15,120
Luck Company		750		24,600		22,880
Wilson Company		350		11,200		11,420
	Total			$51,880		$49,420

On May 10, Year 2, Gruden Bancorp Inc. purchased 500 shares of Carroll Inc., at $32 per share plus a $60 brokerage commission.

Provide the journal entries to record the following:

a. The adjustment of the trading security portfolio to fair value on December 31, Year 1.

Year 1, Dec. 31	Unrealized Gain (Loss) on Trading Investments	fill in the blank ad400807afdbfa2_2
	Valuation Allowance for Trading Investments		fill in the blank ad400807afdbfa2_4

b. The May 10, Year 2, purchase of Carroll Inc. stock.

Year 2, May 10	Investments-Carroll Inc.	fill in the blank c5a87ff7e00ffec_2
	Cash		fill in the blank c5a87ff7e00ffec_4

Equity Method for Stock Investment

On January 4, Year 1, Ferguson Company purchased 62,500 shares of Silva Company directly from one of the founders for a price of $60 per share. Silva has 250,000 shares outstanding, including the Daniels shares. On July 2, Year 1, Silva paid $181,000 in total dividends to its shareholders. On December 31, Year 1, Silva reported a net income of $584,000 for the year. Ferguson uses the equity method in accounting for its investment in Silva.

a. Provide the Ferguson Company journal entries for the transactions involving its investment in Silva Company during Year 1.

Year 1, Jan. 4	Investment in Silva Company Stock	fill in the blank 0b644bfef010faf_2
	Cash		fill in the blank 0b644bfef010faf_4
Year 1, July 2	Cash	fill in the blank 0b644bfef010faf_6
	Investment in Silva Company Stock		fill in the blank 0b644bfef010faf_8
Year 1, Dec. 31	Investment in Silva Company Stock	fill in the blank 0b644bfef010faf_10
	Income of Silva Company		fill in the blank 0b644bfef010faf_12

b. Determine the December 31, Year 1, balance of Investment in Silva Company Stock. $fill in the blank cca5b4fc7fbdfb1_1