Business, 07.06.2020 01:58 chl75

Stoll Co.'s long-term available-for-sale portfolio at the start of this year consists of the following. Available-for-Sale Securities Cost Fair Value
Company A bonds $534,100 $492,000
Company B notes 159,140 155,000
Company C bonds 662,400 642,140

Stoll enters into the following transactions involving its available-for-sale debt securities this year.

Jan. 29 Sold one-half of the Company B notes for $78,820.
July 6 Purchased bonds of Company X for $122,100.
Nov. 13 Purchased notes of Company Z for $267,300.
Dec. 9 Sold all of the bonds of Company A for $524,800.

The fair values at December 31 are B, $82,300; C, $603,800; X, $120,000; Z, $276,000; W, $382,500 and Y, $1,062,500

Required:
a. Determine the amount Stoll should report on its December 31, 2017, balance sheet for its long-term investments in available-for-sale securities.
b. Prepare any necessary December 31, 2017, adjusting entry to record the fair value adjustment for the long-term investments in available-for-sale securities.
c. Prepare any necessary December 31, 2017, adjusting entry to record the fair value adjustment for the long-term investments in available-for-sale securities.

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a. Determine the amount Stoll should report on its December 31, 2017, balance sheet for its long-term investments in available-for-sale securities.

Company B notes $82,300 Company C bonds $603,800Company X bonds $120,000Company Z notes $276,000

b. (same as c.)Prepare any necessary December 31, 2017, adjusting entry to record the fair value adjustment for the long-term investments in available-for-sale securities.

Dr Company B notes 4,800 Cr Unrealized gain on Company B notes 4,800 (= $82,300 - $77,500)Dr Unrealized loss on Company C bonds 38,340 (= $603,800 - $642,140) Cr Company C bonds 38,340Dr Unrealized loss on Company X bonds 2,100 (= $120,000 - $122,100) Cr Company X bonds 2,100Dr Company Z notes 8,100 Cr Unrealized gain on Company Z notes 8,100 (= $276,000 - $267,300)

Explanation:

beginning of the year cost fair value

Company A bonds $534,100 $492,000

Company B notes $159,140 $155,000

Company C bonds $662,400 $642,140

since available for sale assets must be recorded at fair value, we must assume that the company prepared the adjusting entries at the end of the previous year (unrealized gains or losses):

Jan. 29 Sold one-half of the Company B notes for $78,820.

Dr Cash 78,820

Cr Company B notes 77,500

Cr Gain on sale of Company B notes 1,320

July 6 Purchased bonds of Company X for $122,100.

Dr Company X bonds AFS 122,100

Cr Cash 122,100

Nov. 13 Purchased notes of Company Z for $267,300.

Dr Company Z bonds AFS 267,300

Cr Cash 267,300

Dec. 9 Sold all of the bonds of Company A for $524,800.

Dr Cash 524,800

Cr Company A notes 492,000

Cr Gain on sale of Company B notes 32,800

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