Exercise 17-7 On December 21, 2017, Riverbed Company provided you with the following information regarding its equity...

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Accounting

Exercise 17-7
On December 21, 2017, Riverbed Company provided you with thefollowing information regarding its equity investments.
December 31, 2017
Investments (Trading)
Cost
Fair Value
Unrealized Gain (Loss)
Clemson Corp. stock $18,900 $17,900 $(1,000 )
Colorado Co. stock 9,000 8,000 (1,000 )
Buffaloes Co. stock 18,900 19,540 640
Total of portfolio $46,800 $45,440 (1,360 )
Previous fair value adjustment balance 0
Fair value adjustment—Cr. $(1,360 )

During 2018, Colorado Company stock was sold for $8,550. The fairvalue of the stock on December 31, 2018, was Clemson Corp.stock—$18,010; Buffaloes Co. stock—$19,430. None of the equityinvestments result in significant influence.
(a) Prepare the adjusting journal entry needed on December 31,2017.
(b) Prepare the journal entry to record the sale of the ColoradoCo. stock during 2018.
(c) Prepare the adjusting journal entry needed on December 31,2018.

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Solution:

Riverbed Company
No.	General Journal	Debit	Credit
a.	Unrealized Holding gain or loss Dr	$1,360
	To Fair Value Adjustment		$1,360
	(To record Unrealized gain or loss at December 31, 2017)

b.	Cash Dr	$8,550
	Loss on Sale of Investment	$450
	To Trading Investments		$9,000
	(To record sale of colorado stock during 2018)

c.	Fair Value Adjustment Dr (Note)	$1,000
	To Unrealized Holding gain or loss		$1,000
	(To record Unrealized gain or loss at December 31, 2018)

Note:

Computation of Unrealized gain or loss on December 31, 2018
Investment (Trading)	Cost	Fair Value at Dec 31 2018	Unrealized holding Gain (Loss)
Clemson Corp.	18900	18010	-890
Buffaloes co.	18900	19430	530
Total			-360
Previous fair value adjustment balance			1360
Fair Value adjustment 2018			1000

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Transcribed Image Text

Exercise 17-7On December 21, 2017, Riverbed Company provided you with thefollowing information regarding its equity investments.December 31, 2017Investments (Trading)CostFair ValueUnrealized Gain (Loss)Clemson Corp. stock$18,900$17,900$(1,000)Colorado Co. stock9,0008,000(1,000)Buffaloes Co. stock18,90019,540640Total of portfolio$46,800$45,440(1,360)Previous fair value adjustment balance0Fair value adjustment—Cr.$(1,360)During 2018, Colorado Company stock was sold for $8,550. The fairvalue of the stock on December 31, 2018, was Clemson Corp.stock—$18,010; Buffaloes Co. stock—$19,430. None of the equityinvestments result in significant influence.(a)Prepare the adjusting journal entry needed on December 31,2017.(b)Prepare the journal entry to record the sale of the ColoradoCo. stock during 2018.(c)Prepare the adjusting journal entry needed on December 31,2018.

December 31, 2017
Investments (Trading)	Cost	Fair Value	Unrealized Gain (Loss)
Clemson Corp. stock	$18,900	$17,900	$(1,000	)
Colorado Co. stock	9,000	8,000	(1,000	)
Buffaloes Co. stock	18,900	19,540	640
Total of portfolio	$46,800	$45,440	(1,360	)
Previous fair value adjustment balance			0
Fair value adjustment—Cr.			$(1,360	)

(a)		Prepare the adjusting journal entry needed on December 31,2017.
(b)		Prepare the journal entry to record the sale of the ColoradoCo. stock during 2018.
(c)		Prepare the adjusting journal entry needed on December 31,2018.