Patterson Corp. carries an account in its general ledger called Investments, whi
ID: 2350401 • Letter: P
Question
Patterson Corp. carries an account in its general ledger called Investments, which contained debits for investment purchases, and no credits, with the following descriptions.**Feb. 1, 2010 Shazz Company common stock, $100 par, 200 shares- $37,400
**April 1, 2010- U.S. government bonds, 11%, due April 1, 2020, interest payable April 1 and October 1, 110 bonds of $1,000 par each- $110,000
**July 1, 2010- McDaniel Company 12% bonds, par $50,000, dated March 1, 2010 purchased at 104 plus accrued interest, interest payable annually on March 1, due March 1, 2030- $54,000
INSTRUCTIONS:
The fair values of the securities on December 31, 2010, were:
Shazz Company common stock- $31,800
U.S. government bonds- $124,700
McDaniel Company bonds- $58,600
What adjusting entry would you recommend be made? **Accounts are Securities Fair Value Adj. (debit) & Unrealized Holding Gain/Loss- Equity (credit).
Explanation / Answer
Available-for-Sale Portfolio
Securities Cost Fair Value UnrealizedGain (Loss)
harapova Company stock $ 37,400 $ 31,800 $ (5,600)
government bonds 110,000 124,700 14,700
McGrath Company bonds 51,949 58,600 6,651
Total $199,349 $215,100 15,751
fair value adjustment — Dr. $15,751
($50,000 X 1.04)
Fair Value Adjustment (Available-for-Sale) ............................15,751
Unrealized Holding Gain or Loss
Equity ............................................................................ 15,751