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E 12-6

On February 18, 2011, Union Corporation purchased 10,000 shares of IBM common stock as a long-term investment at $60 per share. On December 31, 2011, and December 31, 2012, the market value of IBM stock is $58 and $61 per share, respectively.

Required:

1.What is the appropriate reporting category for this investment? Why?

2.Prepare the adjusting entry for December 31, 2011.

3.Prepare the adjusting entry for December 31, 2012.

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Solution Summary

The solution explains how to record the long term investment and prepare the adjusting entry

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1.What is the appropriate reporting category for this investment? Why?

Since the stock is purchased as a long term investment, it would be reported as an available for sale security

2.Prepare the adjusting entry for ...

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