Question
Recording and Reporting Equity Investment: FV-NI Adjust FVA at Year-End On November 1, 2020, Drucker Co. acquired the following investments in equity securities measured at
Recording and Reporting Equity Investment: FV-NI
Adjust FVA at Year-End
On November 1, 2020, Drucker Co. acquired the following investments in equity securities measured at FVNI.
Kelly Corporation600 shares of common stock (no-par) at $60 per share. Keefe Corporation360 shares preferred stock ($10 par) at $20 per share. On December 31, 2020, the companys year-end, the quoted market prices were as follows: Kelly Corporation common stock, $52, and Keefe Corporation preferred stock, $24. Following are the data for 2021.
Mar. 2, 2021 Dividends per share, declared and paid: Kelly Corp., $1, and Keefe Corp., $0.50. Oct. 1, 2021 Sold 120 shares of Keefe Corporation preferred stock at $25 per share. Dec. 31, 2021 Fair values: Kelly common, $46 per share, Keefe preferred, $26 per share.
- Journal Entries and Financial Statement Presentation for 2020
- Journal Entries and Financial Statement Presentation for 2021
a. Prepare the entry for Drucker Company to record the purchase of the securities.
Date | Account Name | Dr. | Cr. |
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Nov. 1, 2020 | AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment--TSInvestment in AFS SecuritiesFair Value Adjustment--AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment--Equity SecuritiesFair Value Adjustment--Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss--OCIUnrealized Gain or Loss--IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/A
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AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment--TSInvestment in AFS SecuritiesFair Value Adjustment--AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment--Equity SecuritiesFair Value Adjustment--Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss--OCIUnrealized Gain or Loss--IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/A
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b. Prepare any adjusting entry needed at December 31, 2020.
Date | Account Name | Dr. | Cr. |
---|---|---|---|
Dec. 31, 2020 | AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment--TSInvestment in AFS SecuritiesFair Value Adjustment--AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment--Equity SecuritiesFair Value Adjustment--Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss--OCIUnrealized Gain or Loss--IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/A
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| Answer
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AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment--TSInvestment in AFS SecuritiesFair Value Adjustment--AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment--Equity SecuritiesFair Value Adjustment--Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss--OCIUnrealized Gain or Loss--IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/A
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c. Indicate the items and amounts that should be reported on the 2020 income statement of Drucker and its year-end balance sheet. Assume that the investments are classified as current. Note: Use a negative sign to indicate a loss.
Income Statement | 2020 |
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Other Revenues and Gains | |
Net gain (loss) on equity securities | Answer
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Balance Sheet, December 31 | 2020 |
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Assets | |
Investment in equity securities | Answer
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