Question

Jerome has insignificant influence of Melina Corporation because it owns less than 20% of the voting stock. The cost of the Melina stock is $5,000 and has a fair value of $6,000 on December 31 at the end of the first year it held the securities. Complete the necessary adjusting entry selecting the account names from the pull-down menus and entering dollar amounts in the debit and credit columns.

Answer 1

Dec 31

Dr Fair value adjustment - stock $1,000

Cr Unrealized gain - Income $1,000

Step-by-step explanation:

Preparation of the necessary adjusting entry

Based on the information given if The cost of the Melina stock was the amount of $5,000 in which it has a fair value of the amount of $6,000 on December 31 which means that the necessary adjusting entry will be :

Dec 31

Dr Fair value adjustment - stock $1,000

Cr Unrealized gain - Income $1,000

($6,000 - $5,000)