FINANCIAL ACCOUNTING
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Problem 15-3A Debt investments in available-for-sale securities; unrealized and realized gains and losses LO P3
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[The following information applies to the questions displayed below.]
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 | $ | 533,600 | $ | 492,000 | ||
| Company B notes | 159,310 | 150,000 | ||||
| Company C bonds | 661,900 | 641,950 | ||||
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 $78,430. | ||
| July | 6 | Purchased bonds of Company X for $120,800. | ||
| Nov. | 13 | Purchased notes of Company Z for $267,100. | ||
| Dec. | 9 | Sold all of the bonds of Company A for $524,100. |
The fair values at December 31 are B, $82,500; C, $609,100; X, $118,000; and Z, $279,000.
Transcribed Image Text:**Fair Value Adjustment Computation - Available-for-Sale Securities**
| **December 31 AFS Securities** | **Cost** | **Fair Value** | **Unrealized Amount** | **Gain or Loss?** |
|--------------------------------|---------|------------|-----------------|-----------------|
| Company B notes | $79,655 | | | |
| Company C bonds | $661,900 | $609,100 | | |
| Company X bonds | $120,800 | $118,000 | | |
| Company Z notes | $267,100 | | | |
| **Total** | **$1,129,455** | **$727,100** | **$3** | **Loss** |
**Further Details:**
- **Required 2 December 31 Balance in the Fair Value Adjustment account**: (Credit)
- **Balance at beginning of year in the Fair Value Adjustment account**: $70,860 (Credit)
- **December 31 required adjustment to the Fair Value Adjustment account**: (Debit)
**Summary Section:**
- **Balance at beginning of year**: $70,860
This table is used to compute the fair value adjustment for available-for-sale securities. It includes details about the cost, fair value, unrealized amounts, and gain or loss associated with each security. Adjustments are calculated to align the fair value with the market value at the year-end, impacting the Fair Value Adjustment account.
Transcribed Image Text:**Problem 15-3A Debt investments in available-for-sale securities; unrealized and realized gains and losses**
**LO P3**
*The following information applies to the questions displayed below.*
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 | $533,600 | $492,000 |
| Company B notes | $159,310 | $150,000 |
| Company C bonds | $661,900 | $641,950 |
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 $78,430.
- **July 6** Purchased bonds of Company X for $120,800.
- **Nov. 13** Purchased notes of Company Z for $267,100.
- **Dec. 9** Sold all of the bonds of Company A for $524,100.
The fair values at December 31 are B, $82,500; C, $609,100; X, $118,000; and Z, $279,000.
**Problem 15-3A Part 1 and 2**
**Required:**
1. Prepare journal entries to record these transactions, including the December 31 adjusting entry to record the fair value adjustment for the long-term investments in available-for-sale securities.
2. Determine the amount Stoll reports on its December 31 balance sheet for its long-term investments in available-for-sale securities.
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