Accounting for investments?
As noted below, purchased investment in four public trade companies. The investments represent less than a 20% interest in any of the investee companies and will be carried in the firm's trading portfolio.
Company---------No. Shares---------------Price per share
White, Corp------1000---------------------------- $ 20
Well Corp---------2000---------------------------- $ 18
Roach & Clark---3000---------------------------- $ 7
Cooley Corp-----17000-------------------------- $ 12
(I need help doing a General Journal entry and an adjustment entry if need.)
Investment best answer:
Answer by JKRB
You haven't provided enough information to do any adjustments. Since they own less than 20% of each company's stock, the fair value method should be used. There are only two adjustments you will have to worry about.
Dividends Received
Dr Cash
Cr Dividends Revenue
Fair value (market price) adjustment at the end of each accounting period.
The difference between the original cost of the investment and the current market price will be the amount of adjustment.
If the total market price of all investments is higher than the total original cost of all investments, the adjustment would be:
Dr Securities Fair Value Adjustment
Cr Unrealized Holding Gain or Loss
If the total market price of all investments is lower than the total original cost of all investments, the adjustment would be reversed.
Dr Unrealized Holding Gain or Loss
Cr Securities Fair Value Adjustment
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