Question

On December 31, 2017, Turnball Associates owned the following securities, held as a long-term investment.

The securities are not held for influence or control of the investee.
Common Stock Shares Cost
Gehring Co. 1,900 $53,200
Wooderson Co. 5,000 40,000
Kitselton Co. 1,800 39,600
On December 31, 2017, the total fair market value of the security was equal to its cost.
In 2018, the following transactions occurred:
Aug.1 Received $0.50 per share cash dividend on Gehring Co. common stock.
Sept.1 Sold 1,500 shares of Wooderson Co. common stock for cash at $7 per share.
Oct.1 Sold 760 shares of Gehring Co. common stock for cash at $31 per share.
Nov.1 Received $1 per share cash dividend on Kitselton Co. common stock.
Dec.15 Received $0.50 per share cash dividend on Gehring Co. common stock.
Dec.31 Received $1 per share annual cash dividend on Wooderson Co. common stock.
At December 31, the fair market values per share of the common stocks were:
Gehring Co. $30
Wooderson Co. $7
Kitselton Co. $20
Required:
1. Journalize the 2018 transactions and post to the account Stock Investments.
2. Prepare the adjusting entry at December 31, 2018, to show the securities at fair market value.
The stock should be classified as available-for-sale securities.
3. Show the balance sheet presentation of the investments at December 31, 2018.
At this date, Turnball Associates has Common stock of $1,562,000 and Retained earnings $1,076,000.

Answer 1

Common Stock Shares Cost

Gehring Co. 1,800 $50,400

Wooderson Co. 4,800 33,600

Kitselton Co. 1,400 25,200

On December 31, 2017, the total fair value of the securities was equal to its cost. In 2018, the following transactions occurred.

Aug. 1 Received $0.50 per share cash dividend on Gehring Co. common stock.

Sept. 1 Sold 1,440 shares of Wooderson Co. common stock for cash at $6 per share.

Oct. 1 Sold 720 shares of Gehring Co. common stock for cash at $31 per share.

Nov. 1 Received $1 per share cash dividend on Kitselton Co. common stock.

Dec. 15 Received $0.50 per share cash dividend on Gehring Co. common stock.

Dec. 31 Received $1 per share annual cash dividend on Wooderson Co. common stock.

At December 31, the fair values per share of the common stocks were: Gehring Co. $30, Wooderson Co. $6, and Kitselton Co. $16.

a-Journalize the 2018 transactions and post to the account Stock Investments. (Use the T-account form.)

b-Prepare the adjusting entry at December 31, 2018, to show the securities at fair value. The stock should be classified as available-for-sale securities. c-Show the balance sheet presentation of the investments at December 31, 2018. At this date, Turnball Associates has common stock $1,400,000 and retained earnings $1,000,000.