I would highly appreciate it if you could help me ASAP. I posted this question y
ID: 2539947 • Letter: I
Question
I would highly appreciate it if you could help me ASAP. I posted this question yesterday and I was provided with a wrong answer.
Problem 17-8 Sweet Corp. is a medium-sized corporation specializing in quarrying stone for building construction. The company has long dominated the market, at one time achieving a 70% market penetration. During prosperous years, the company's profits, coupled with a conservative dividend policy, resulted in funds available for outside investment. Over the years, Sweet has had a policy of investing idle cash in equity securities. In particular, Sweet has made periodic investments in the company's principal supplier, Norton Industries. Although the firm currently owns 12% of the outstanding common stock of Norton Industries, Sweet does not have significant influence over the operations of Norton Industries. Cheryl Thomas has recently joined Sweet as assistant controller, and her first assignment is to prepare the 2017 year-end adjusting entries for the accounts that are valued by the "fair value" rule for financial reporting purposes. Thomas has gathered the following information about Sweet' pertinent accounts. 1. Sweet has equity securities related to Delaney Motors and Patrick Electric. During 2017, Sweet purchased 101,000 shares of Delaney Motors for $1,395,000; these shares currently have a fair value of $1,559,000. Sweet' investment in Patrick Electric has not been profitable; the company acquired 52,000 shares of Patrick in April 2017 at $20 per share, a purchase that currently has a value of 704,000 2. Prior to 2017, Sweet invested $22,519,000 in Norton Industries and has not changed its holdings this year. This investment in Norton Industries was valued at $21,604,000 on December 31, 2016. Sweet 12% ownership of Norton Industries has a current fair value of $22,185,000 on December 2017 Your answer is partially correct. Try again. Prepare the appropriate adjusting entries for Sweet as of December 31, 2 " rule for the securities described above. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) 2017, to reflect the application of the fair value Account Titles and Explanation Debit Credit 581000 Unrealized Holding Gain or Loss Equity 581000Explanation / Answer
Date Account titles and Explanation Debit Credit 2017 Dec 31. Unrealized holding gain or loss-income 172000 Fair value adjustment-Trading 172000 (Fair value adjustment for trading securities) Dec 31. Fair value adjustment-Available for sale 581000 Unrealized holding gain or loss-Equity 581000 (Fair value adjustment for available for sale securities) Computations: Fair value of trading securities: Security Cost Fair value Unrealized Gain/(Loss) Delaney Motors 1395000 1559000 164000 Patrick Electric 1040000 704000 -336000 (52000*20) Total -172000 Availble for sale securities: 2016 Security Cost Fair value Unrealized Gain/(Loss) Norton industries 22519000 21604000 -915000 2017 Norton industries 22519000 22185000 334000 Previous year 2016 adj. -915000 Securities fair value adjustment (Dr.) -581000