On December 31, 1996, Karen Associates owned the following securities that are held as a long-term investment.

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On December 31, 1996, Karen Associates owned the following securities that are held as a long-term investment. The securities are not held for influence or control of the investee.

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On this date, the total fair value of the securities was equal to its cost. In 1997, the following transactions occurred.
July 1 Received \(\$ 1\) per share semiannual cash dividend on \(Y\) Co. common stock.
Aug. 1 Received \(\$ .50\) per share cash dividend on \(X\) Co. common stock.
Sept. 1 Sold 700 shares of \(Y\) Co. common stock for cash at \(\$ 8\) per share less brokerage fees of \(\$ 200\).
Oct. 1 Sold 600 shares of \(\mathrm{X}\) Co. common stock for cash at \(\$ 54\) per share less brokerage fees of \(\$ 500\).
Nov. 1 Received \(\$ 1\) per share cash dividend on \(\mathrm{Z}\) Co. common stock.
Dec. 15 Received \(\$ .50\) per share cash dividend on \(X\) Co. common stock.
31 Received \(\$ 1\) per share semiannual cash dividend on \(Y\) Co. common stock.
At December 31 , the fair values per share of the common stocks were: X Co. \(\$ 48, \mathrm{Y}\) Co. \(\$ 8\), and \(\mathrm{Z}\) Co. \(\$ 17\).
\section*{Instructions}

(a) Journalize the 1997 transactions and post to the account Stock Investments. (Use the T-account form.)

(b) Prepare the adjusting entry at December 31, 1997, to show the securities at fair value. The stock should be classified as available-for-sale securities.

(c) Show the balance sheet presentation of the investments and the unrealized gain (loss) at December 31, 1997. At this date, Karen Associates has common stock \(\$ 1,500,000\) and retained earnings \(\$ 1,000,000\).

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Financial Accounting

ISBN: 9780471169208

2nd Edition

Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso

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