Reference no: EM132315594
Exercise
Presented below is information related to the purchases of common stock by Blue Company during 2017.
|
|
Cost
(at purchase date)
|
Fair Value
(at December 31)
|
|
|
|
|
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Investment in Arroyo Company stock
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$107,000
|
$86,000
|
|
Investment in Lee Corporation stock
|
234,000
|
281,000
|
|
Investment in Woods Inc. stock
|
178,000
|
189,000
|
|
Total
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$519,000
|
$556,000
|
In addition, assume that the investment in the Woods Inc. stock was sold during 2018 for $193,000. At December 31, 2018, the following information relates to its two remaining investments of common stock.
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Cost Fair Value
(at purchase date) (at December 31)
|
|
|
Investment in Arroyo Company stock
|
$107,000
|
$148,000
|
|
Investment in Lee Corporation stock
|
234,000
|
291,000
|
|
Total
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$341,000
|
5439,000
|
Net income before any security gains and losses for 2018 was $848,000.
(a) Compute the amount of net income or net loss that Blue should report for 2018, taking into consideration Blue's security transactions for 2018, assuming Blue did not select the fair value option for investments in the Lee and Woods corporations.
Net income or net loss that Blue should report for 2018
(b) Prepare the journal entry to record unrealized gain or loss related to the investment in Arroyo Company stock at December 31, 2018.
(Credit account titles are automatically Indented when amount Is entered. Do not indent manually. If no entry Is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date Account Mies and Explanation Debit Credit