On December 21, 2020, Bucky Katt Company provided you with the following information regarding its equity investments. December 31, 2020 Investments Cost Fair Value Unrealized Gain (Loss) Clemson Corp. stock $20,000 $19,000 $(1,000) Colorado Co. stock 10,000 9,000 (1,000) Buffaloes Co. stock 20,000 20,600 600 Total of portfolio $50,000 $48,600 (1,400) Previous fair value adjustment balance –0– Fair value adjustment—Cr. $(1,400) During 2021, Colorado Co. stock was sold for $9,400. The fair value of the stock on December 31, 2021, was Clemson Corp. stock—$19,100; Buffaloes Co. stock—$20,500. None of the equity investments result in significant influence. Instructions a. Prepare the adjusting journal entry needed on December 31, 2020. b. Prepare the journal entry to record the sale of the Colorado Co. stock during 2021. c. Prepare the adjusting journal entry needed on December 31, 2021.
On December 21, 2020, Bucky Katt Company provided you with the following information regarding its equity investments. December 31, 2020 Investments Cost Fair Value Unrealized Gain (Loss) Clemson Corp. stock $20,000 $19,000 $(1,000) Colorado Co. stock 10,000 9,000 (1,000) Buffaloes Co. stock 20,000 20,600 600 Total of portfolio $50,000 $48,600 (1,400) Previous fair value adjustment balance –0– Fair value adjustment—Cr. $(1,400) During 2021, Colorado Co. stock was sold for $9,400. The fair value of the stock on December 31, 2021, was Clemson Corp. stock—$19,100; Buffaloes Co. stock—$20,500. None of the equity investments result in significant influence. Instructions a. Prepare the adjusting journal entry needed on December 31, 2020. b. Prepare the journal entry to record the sale of the Colorado Co. stock during 2021. c. Prepare the adjusting journal entry needed on December 31, 2021.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
On December 21, 2020, Bucky Katt Company provided you with the following information regarding its equity investments.
| December 31, 2020 | ||||||
| Investments | Cost | Fair Value | Unrealized Gain (Loss) | |||
| Clemson Corp. stock | $20,000 | $19,000 | $(1,000) | |||
| Colorado Co. stock | 10,000 | 9,000 | (1,000) | |||
| Buffaloes Co. stock | 20,000 | 20,600 | 600 | |||
| Total of portfolio | $50,000 | $48,600 | (1,400) | |||
| Previous fair value adjustment balance | –0– | |||||
| Fair value adjustment—Cr. | $(1,400) |
During 2021, Colorado Co. stock was sold for $9,400. The fair value of the stock on December 31, 2021, was Clemson Corp. stock—$19,100; Buffaloes Co. stock—$20,500. None of the equity investments result in significant influence.
Instructions
a. Prepare the
b. Prepare the journal entry to record the sale of the Colorado Co. stock during 2021.
c. Prepare the adjusting journal entry needed on December 31, 2021.
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