Questions -
Q1. At December 31, 20x1, the available-for-sale equity security portfolio for Stef, Inc., is as follows:
|
Security
|
Cost
|
Fair Value
|
|
A
|
$17,500
|
$15,000
|
|
B
|
12,500
|
14,000
|
|
C
|
23,000
|
25,500
|
|
Total
|
53,000
|
54,500
|
Previous security fair value adjustment balance - Dr. 400.
On January 20, 20x2, Stef sold security A for $15,200, and paid a brokerage fee of $100.
Required:
1. Prepare the adjusting entry at December 31, 20x1.
2. Show the balance sheet presentation of the investment related accounts at December 31, 20x1.
3. Prepare the journal entry for the sale of security A.
4. Do Questions 1, 2 & 3, assuming the investments are classified as trading securities.
Q2. On January 1, 2013, American Corporation purchased 25% of the outstanding voting shares of Short Supplies common stock for $210,000 cash. On that date, Short's book value and fair value were both $840,000. The equity method is deemed appropriate for this investment. Short's net income reported on December 31, 2013, was $80,000. During 2013, Short also paid cash dividends in the amount of $24,000.
Required: Prepare the journal entries necessary to record the above information on American Corporation's books during 2013.