Equity Securities Entries and Disclosures
Not what you're looking for?
Parrot Company has the following securities in its investment portfolio on December 31, 2010 (all securities were purchased in 2010):
3,000 shares of Ames Co. common stock which cost $58,500
10,000 shares of Master Ltd. common stock which cost $580,000
6,000 shares of Kong Company preferred stock which cost $255,000
The Securities Fair Value Adjustment account shows a credit of $10,100 at the end
of 2010.
In 2011, Parrot completed the following securities transactions.
1. On January 15, sold 3,000 shares of Ames's common stock at $22
per share less fees of $2,150
2. On April 17, purchased 1,000 shares of Cast's common stock at $33.50
per share plus fees of $1,980
On December 31, 2011, the market values per share of these securities were:
Master Ltd. $61.00
Kong Co. $40.00
Cast Co. $29.00
In addition, the accounting supervisor of Parrot told you that, even though all these securities have readily determinable fair values, Parrot will not actively trade these securities because the top management intends to hold them for more than one year.
Instructions:
(a) Prepare the entry for the security sale on January 15, 2011.
Gross selling price of 3,000 shares at $23 $66,000
Less: Commissions, taxes, and fees Amount
Text Title Formula
Text Title Amount
Gain on sale of stock Formula
Jan 15, 11 Cash Formula
Account Title Amount
Account Title Amount
(b) Prepare the journal entry to record the security purchase on April 17, 2011.
Total purchase price is:
Number of shares 1,000
Cost per share Amount
Text title Formula
Text title Amount
Text title Formula
Apr 17, 11 Available-for-Sale Securities Amount
Account Title Amount
"(c) Compute the unrealized gains or losses and prepare the adjusting entry for Parrot on
December 31, 2011."
Available-for-Sale Portfolioâ?"December 31, 2011
Securities Cost "Fair
Value" "Unrealized
Gain
(Loss)"
Master Ltd. $580,000 Amount Formula
Kong Co. Amount Amount Formula
Cast Co. Amount Amount Formula
Total of portfolio Formula Formula Formula
Previous securities fair value adjustment balanceâ?"Cr. Amount
Securities fair value adjustmentâ?"Dr. Formula
Dec 31, 11 Securities Fair Value Adjustment (Available-for-Sale) Amount
Account Title Amount
(d) How should the unrealized gains or losses be reported on Parrot's balance sheet?
Enter text answer as appropriate.
Purchase this Solution
Solution Summary
The solution prepares Equity Securities Entries and Disclosures.
Purchase this Solution
Free BrainMass Quizzes
Writing Business Plans
This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.
Learning Lean
This quiz will help you understand the basic concepts of Lean.
Paradigms and Frameworks of Management Research
This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.
Motivation
This tests some key elements of major motivation theories.