Presented below is information related to the purchases of common stock by Swift
ID: 2551863 • Letter: P
Question
Presented below is information related to the purchases of common stock by Swifty Company during 2017.
Cost
(at purchase date)
Fair Value
(at December 31)
In addition, assume that the investment in the Woods Inc. stock was sold during 2018 for $183,000. At December 31, 2018, the following information relates to its two remaining investments of common stock.
Cost
(at purchase date)
Fair Value
(at December 31)
Net income before any security gains and losses for 2018 was $973,000.
(a) Compute the amount of net income or net loss that Swifty should report for 2018, taking into consideration Swifty’s security transactions for 2018, assuming Swifty did not select the fair value option for investments in the Lee and Woods corporations.
(b) Prepare the journal entry to record unrealized gain or loss related to the investment in Arroyo Company stock at December 31, 2018. (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.)
Date
Account Titles and Explanation
Debit
Credit
Cost
(at purchase date)
Fair Value
(at December 31)
Explanation / Answer
Gain on Sale of Wood Inc. Stock ($183000-$170000) = $13,000 Unrealized gain of Year 2017 Investment in Arroyo Company 60000 (135000-75000) Investment in Lee Corporation (315000-306000) 9000 Unrealized gain 69000 $ Net Income before security gain & taxes 973000 Add : Gain on Sale 13000 Net Income that Swifty should report 986000 Journal Entry 31-Dec-18 Investments in Arroyo Company Dr 60000 Investments in Lee Corporation Dr 9000 To Unrealized Gain 69000 (Being unrealized gain Provided)