Question 2

Harris Pilton purchased 25,000 shares of Goblins Inc. for $15.00 per share. Goblins has 100,000 shares outstanding. On April 1, Goblins paid an $0.45 per share cash dividend. On December 31, Goblins reported net income of $225,000. On December 31, the market price per share of Goblins stock is $18.00 per share. On January 1 of the following year, Harris Pilton sold all of the shares for $18.00 per share.

Instructions

1. What is the carrying value of the investment on December 31?
2. What adjustment to market value is necessary on December 31 due to the change in the market price?
3. What gain or loss did Harris Pilton realize on the sale of the investment on January 1 of the following year?

Question 3

Pipe Pig Inc. purchased 3,000 shares of Bonobo Inc. stock for $12.00 per share on September 29^th. At year-end, the market price of Bonobo Inc. stock dropped to $10.50. Bonobo has 50,000 shares outstanding and paid a $2.50 per share cash dividend this year. The fair value adjustment account has a beginning debit balance of $9,000.

Instructions

Record the necessary journal entries based on the information provided.