17-5 Gypsi
(a) (1) October
10, 2003
Cash.................................................................... 270,000
Gain on
Sale
Trading
Securities.................................... 225,000
(2) November
2, 2003
Trading
Securities............................................ 178,500
Cash............................................................ 178,500
(3) At
September 30, 2003, Gypsy Kings had the following fair value adjustment:
Trading
Securities Portfolio—September 30, 2003
|
Securities
|
Cost
|
Fair Value
|
Unrealized Gain (Loss)
|
|
Fogelberg common
|
$225,000
|
$200,000
|
($(25,000)
|
|
Petra, Inc. preferred
|
133,000
|
140,000
|
( 7,000)
|
|
Weisberg common
|
180,000
|
179,000
|
( (1,000)
|
|
Total of portfolio
|
$538,000
|
$519,000
|
((19,000)
|
|
Previous
securities fair value adjustment balance
|
|
|
( 0)
|
|
Securities
fair value adjustment—Cr.
|
|
|
($(19,000)
|
At December 31, 2003, Gypsy Kings had the following
fair value adjustment:
Trading
Securities Portfolio—December 31, 2003
|
Securities
|
Cost
|
Fair Value
|
Unrealized Gain (Loss)
|
|
Petra, Inc. preferred
|
$133,000
|
$ 96,000
|
($(37,000)
|
|
Weisberg common
|
180,000
|
193,000
|
13,000)
|
|
Los Tigres common
|
178,500
|
132,000
|
( (46,500)
|
|
Total of portfolio
|
$491,500
|
$421,000
|
(70,500)
|
|
Previous
securities fair value adjustment balance—Cr.
|
|
|
(19,000)
|
|
Securities
fair value adjustment—Cr.
|
|
|
($(51,500)
|
The entry on December 31, 2003
is therefore as follows:
Unrealized
Holding Gain or Loss—Income.... 51,500
Securities
Fair Value Adjustment
(Trading).................................................... 51,500
(b) The
entries would be the same except that instead of debiting and crediting
accounts associated with trading securities, the accounts used would be
associated with available-for-sale securities. In addition, the Unrealized
Holding Gain or Loss—Equity account is used instead of Unrealized Holding Gain
or Loss—Income. The unrealized holding loss in this case would be deducted from
the stockholders’ equity section rather than charged to the income statement.
17-7 Octavio
(a) Available-for-Sale
Securities.................................. 189,400*
Interest Revenue
($50,000 X .12 X 4/12)...............
2,000
Investments....................................................... 191,400
*($37,400 + $100,000 +
$52,000)
(b) December
31, 2003
Interest Receivable.................................................. 7,750.00
Available-for-Sale
Securities.......................... 50.85
Interest
Revenue.............................................. 7,699.15
[Accrued interest
[ $50,000 X .12 X 10/12 = $5,000.00
[Premium
amortization
[ 6/236 X $2,000 = (50.85)
[Accrued
interest
[ $100,000 X .11 X 3/12 = 2,750.00
$7,699.15 ]
(c) December
31, 2003
Available-for-Sale Portfolio
|
Securities
|
Cost
|
Fair Value
|
Unrealized Gain (Loss)
|
|
Chang Kai-shek Company stock
|
$
37,400
|
$
33,800
|
$
(3,600)
|
|
|
100,000
|
124,700
|
24,700
|
|
Claude Monet Company bonds
|
51,949.15
|
58,600
|
6,650.85
|
|
Total
|
$189,349.15
|
$217,100
|
27,750.85
|
|
Previous securities fair value adjustment balance
|
|
|
0
|
|
Securities fair value adjustment—Dr.
|
|
|
$27,750.85
|
PROBLEM 17-3 (Continued)
Securities Fair Value
Adjustment
(Available-for-Sale)........................................ 27,750.85
Unrealized
Holding Gain or Loss—
Equity....................................................... 27,750.85
(d) July
1, 2004
Cash ($119,200 +
$2,750).................................
121,950
Available-for-Sale
Securities................... 100,000
Interest
Revenue........................................ 2,750
($100,000 X .11 X 3/12)
Gain on Sale
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