Name Number of Shares Cost
Dust Devil, Inc. 1,900 $ 81,700
Gale Co. 850 68,000
Whirlwind Co. 2,850 114,000
Total $263,700
The market price per share for the available-for-sale security portfolio on December
31, 2014, was as follows:
Market Price per Share,
Dec. 31, 2014
Dust Devil, Inc. $40
Gale Co. 75
Whirlwind Co. 42
a. Provide the journal entry to adjust the available-for-sale security portfolio to fair value on December 31, 2014.
b. Describe the income statement impact from the December 31, 2014, journal entry.
Answer:
2014
a. Dec. 31 Unrealized Gain (Loss) on Available-forSale
Investments 4,250
Valuation Allowance for Available-forSale
Investments* 4,250
* $259,450 – $263,700, as determined from the following schedule:
Cost
Fair Value
(Dec. 31, 2014)
Dust Devil, Inc. …………………………………………………………………… $ 81,700 $ 76,0001
Gale Co. …………………………………………………………………………. 68,000 63,7502
Whirlwind Co. …………………………………………………………………… 114,000 119,7003
Total………………………………………………………………………….. $263,700 $259,450
1 1,900 shares × $40 per share
2 850 shares × $75 per share
3 2,850 shares × $42 per share
b. There is no income statement impact from the December 31, 2014, adjusting
entry. Unrealized Gain (Loss) on Available-for-Sale Investments is reported
in the Stockholders’ Equity section of the balance sheet. On December 31,
2014, Unrealized Gain or Loss on Available-for-Sale Investments would be
disclosed as follows:
Unrealized gain (loss) on available-for-sale investments…………………… $(4,250)