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.

Required:
Write the necessary adjusting entry.

Answer 1

Dec 31

Dr Fair value adjustment - stock $1,000

Cr Unrealized gain - Income $1,000

Step-by-step explanation:

Preparation of the journal entry to record the necessary adjusting entry

Based on the information given the journal entry to record 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)