Accounting for Investments In 2013, Western Community Hospital, a private facili
ID: 2579180 • Letter: A
Question
Accounting for Investments
In 2013, Western Community Hospital, a private facility, receives donated securities with a fair market value and face value of $400,000. The donor specifies that the securities be held as a permanent endowment, and investment income earned on these securities can be used for any purpose. The securities have a fair market value of $360,000 at the end of 2013, and $450,000 at the end of 2014. Dividend income earned on the securities in each of the two years is $10,000
Required
a. Prepare the journal entries to record the above events in 2013 and 2014. Indicate the balance of each account and its placement in the financial statements.
2013 Journal Entries
Use a negative sign with unrealized gain (loss) answer to indicate an unrealized loss.
2014 Journal Entries
Use a negative sign with unrealized gain (loss) answer to indicate an unrealized loss.
Required
b. Assume the same facts as above, except the donation was $400,000 in cash, and the hospital invested the $400,000 in debt securities. How do the entries in a. change?
Explanation / Answer
2013 JOURNAL ENTRY General Journal Description Debit Credit Investment in securities $400,000 Contribution(PR) $400,000 To record the contribution. Cash $10,000 Investment income (UR) $10,000 To record the investment income. Unrealized loss(PR) $40,000 (400000-360000) Investment in securities $40,000 To record the change in value of securities. Account Balance at the end of 2013 Investment in securities $360,000 Contribution $400,000 Investment Income $10,000 Unrealized gain (loss) ($40,000) 2014 JOURNAL ENTRIES Investment in securities $90,000 Unrealized gain (PR) $90,000 (450000-360000) To record change in value of securities