Carlsville Company began operations in the current year and had no prior stock investments. The following transactions are from its short-term stock investments with insignificant influence.

On December 31, prepare the adjusting entry to record the fair value adjustment for the portfolio of stock investments.
July 22 Purchased 1,500 shares of Hunt Corp. at $29 per share.
Sept. 5 Received a $2 cash dividend for each share of Hunt Corp.
Sept. 27 Purchased 3,300 shares of HCA at $25 per share.
Oct. 3 Sold 1,500 shares of Hunt at $24 per share.
Oct. 30 Purchased 1,000 shares of Black & Decker at $57 per share.
Dec. 17 Received a $3 cash dividend for each share of Black & Decker.
Dec. 31 Fair value of the short-term stock investments is $144,000.

Prepare journal entries to record these transactions.

datedetails  Dr             Cr

22-Julstock investment43500  

        bank             43500

5-Sepbank  3000  

    dividend              3000

27-Sepstock investment82500  

        bank                     82500

3-Octbank  36000  

stock investment    36000

30-Octstock investment57000  

         bank              57000

17-Decbank  3000  

       dividends            3000

31-Decfair value loss  3000  

stock investment    3000

Explanation:

For every shares bought to get total amount paid we take the number of shares bought at that date and multiple by the amount per share.

for every dividend paid received, we take the amount received per share owned and multiple by total number of shares owned.

for the fair value loss, we compare the value of the stock investment portfolio to the fair value at the end of the year and adjust the portfolio value to the fair value at the end of the year.

short-term Hunt Corp    43,500 debit

                    cash                   43,500 credit

cash                            3,000 debit

  gain on investment         3,000 credit

sshort-term HCA           82,500 debit

                   cash                82,500 credit

cash                         36,000 debit

loss on investment   7,500  debit

      short-term Hunt Corp     43,500 credit

short-term Black and Decker 57,000 debit

                                 cash            57,000 credit

cash                   3,000 debit

   gain on investment       3,000 credit

short-term investment   4,500 debit

         unrealized gain             4,500 credit

Explanation:

we have to multiply the share cost by the amount we acquire

same goes for sales and compare with the cost to solve for short-term capital gains when we sale and unrealized gains if we don't sale.

when we receive dividends we recognize a gain.

last we check for the book value and compare with the fair value:

B&D  57,000

HCA  82,500

Total 139,500

Fair value 144,000

unrealized gain 4,500

(a) when insurance is obtained through a reciprocal insurer, the insureds are sharing the risk of loss with other subscribers of that reciprocal.

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