CHAPTER 17: Investments Sage, Inc. had the following equity investment portfolio
ID: 2554949 • Letter: C
Question
CHAPTER 17: Investments
Sage, Inc. had the following equity investment portfolio at January 1, 2017.
Evers Company 950 shares @ $14 each $13,300
Rogers Company 900 shares @ $20 each 18,000
Chance Company 480 shares @ $10 each 4,800
Equity investments @ cost 36,100
Fair value adjustment (7,260 ) Equity investments @ fair value $28,840
During 2017, the following transactions took place:
1. On March 1, Rogers Company paid a $2 per share dividend.
2. On April 30, Sage, Inc. sold 310 shares of Chance Company for $12 per share.
3. On May 15, Sage, Inc. purchased 90 more shares of Evers Company stock at $15 per share.
4. At December 31, 2017, the stocks had the following price per share values: Evers $16, Rogers $19, and Chance $9. During 2018, the following transactions took place.
5. On February 1, Sage, Inc. sold the remaining Chance shares for $9 per share.
6. On March 1, Rogers Company paid a $2 per share dividend.
7. On December 21, Evers Company declared a cash dividend of $3 per share to be paid in the next month.
8. At December 31, 2018, the stocks had the following price per share values: Evers $18 and Rogers $21.
A.) Prepare journal entries for each of the above transactions
B.) Prepare a partial balance sheet showing the investment related amounts to be reproted at December 31, 2017
Explanation / Answer
Working Note : Statement showing Calculation of Fair Value Adjustment on 31/12/2017 Journal Entry in the books of Grand Company Security Beg. Bal of Share (a) Cost /Share(b) Purchase /Sales ( c) Cost /Share (d) Balance Share (a+c) Value of Bal Share (at Cost) (a*b)+(c*d) Fair value/Share Total Fair Value of Share Unrealized Gain or (Loss) S.No. Date Account & Explanation Debit Credit Ever Company 950 $14.00 90 $15.00 1040 $14,650.00 $16.00 $16,640.00 $1,990.00 1 01/03/2017 Cash (900*2) $1,800.00 Rogers Company 900 $20.00 900 $18,000.00 $19.00 $17,100.00 -$900.00 Dividend Revenue $1,800.00 Chance Company 480 $10.00 -310 $10.00 170 $1,700.00 $9.00 $1,530.00 -$170.00 To Record Receved of Dividend Total of Portfolio $34,350.00 $35,270.00 $920.00 Previous Fair Value Adjustment Bal. Cr. -$7,260.00 2 30//04/2017 Cash (310 share*$12) $3,720.00 Fair value Adjustment -Dr. $8,180.00 Gain on Sale of Investment (310*($12-10) $620.00 Equity Investment (available for Sale) $3,100.00 Working Note : Statement showing Calculation of Fair Value Adjustment on 31/12/2018 To record Sale of Chance Company 300 Share Security Beg. Bal of Share (a) Value of Bal Share (at Cost) (a*b)+(c*d) Fair value/Share Total Fair Value of Share Unrealized Gain or (Loss) Ever Company 1040 $14,650.00 $18.00 $18,720.00 $4,070.00 3 15/05/2017 Equity Investment (available for Sale) $1,350.00 Rogers Company 900 $18,000.00 $21.00 $18,900.00 $900.00 Cash (90*$15) $1,350.00 To Record Purchase of Ever Company 90 Share Total of Portfolio $32,650.00 $37,620.00 $4,970.00 Previous Fair Value Adjustment Bal. Dr.. $920.00 4 31/12/2017 Fair Value Adjustment ( Avialable for Sale) $8,180.00 Fair Value Adjustment -Dr. $4,050.00 Unrealised Holding Gain or Loss- Equity $8,180.00 To Record Fair Value Adjustment (b): Partial Balance sheet as of Dec 31,2017 Dec31,2018 Current Asset 5 01/02/2018 Cash (170 *$9) $1,530.00 Dividend Receivable $3,120 Loss on sale of Investment 170*($9-$10) $170.00 Equity Investment (available for Sale) $1,700.00 Investment To Record sale of Chance Company Share Equity Investment ( Available for Sale) $35,270.00 $37,260.00 6 01/03/2018 Cash ($2*900) $1,800.00 Stockholder's Equity Dividend Revenue $1,800.00 Accumulated other comprehensive Income $920.00 $4,970.00 To Record Dividend Received from Rogers Company 7 21/12/2018 Dividend Receivable $3,120.00 Dividend Revenue (1040*$3) $3,120.00 To Record Dividend declared by Rogers Co. 8 31/12/2018 Fair Value Adjustment ( Available for Sale) $4,050.00 Unrealised Holding Gain or Loss- Equity $4,050.00 To Record Fair Value Adjustment