Indigo Company has the following securities in its portfolio on December 31, 201
ID: 2340084 • Letter: I
Question
Indigo Company has the following securities in its portfolio on December 31, 2017. None of these investments are accounted for under the equity method. Investments Cost 1,500 shares of Gordon, Inc., Common 5,000 shares of Wallace Corp., Common 400 shares of Martin, Inc., Preferred $73,600 190,600 59,700 $323,900 Fair Value $69,500 185,800 61,400 $316,700 All of the securities were purchased in 2017 In 2018, Indigo completed the following securities transactions. March 1 Sold the 1,500 shares of Gordon, Inc., Common, $45 less fees of $1,200 April 1 Bought 700 shares of Earnhart Corp., Common, $75 plus fees of $1,300 Indigo's portfolio of equity securities appeared as follows on December 31, 2018 Investments Cost Fair Value 5,000 shares of Wallace Corp., Common 700 shares of Earnhart Corp., Common 400 shares of Martin, Inc., Preferred $190,600 53,800 59,700 $304,100 $185,800 50,500 57,900 $294,200 Prepare the general journal entries for Indigo Company for: (a) (b) (c) (d) The 2017 adjusting entry. The sale of the Gordon stock. The purchase of the Earnhart stock. The 2018 adjusting entry for the trading portfolio.Explanation / Answer
(a) Unrealized Holding Gain or Loss- Income $ 7,200
Securities Fair Value Adjustment (trading) $ 7,200
($ 323,900 - $ 316,700)
(b) Cash [(1,500 x $45) - $1,200] $ 66,300
Loss on Sale of Securities $ 7,300
Trading Securities $ 73,600
(c) Trading Securities [(700 x $75) + $1,300] $ 53,800
Cash $ 53,800
(d) Unrealized Holding Gain or Loss - Income $ 2,700
Securities Fair Value Adjustment (trading) $ 2,700
[($ 304,100 - $ 294,200) - $ 7,200]