Buffalo Co. had purchased 160 shares of Washington Co. for $39 each this year (Oregon Co. does not have significant influence). Buffalo Co. sold 80 shares of Washington Co. stock for $45 each. At year-end, the price per share of the Washington Co. stock has dropped to $35.

Required:
Prepare the journal entries for these transactions and any year-end adjustments.

equity securities Washinton Co 6,240 debit

                      cash                             6,240 credit

--to record the purchase--

cash                             3,600 debit

      gain on equity securities               480 credit

       equity securities Washinton Co 3,120 credit

--to record sale--

unrealized loss                    320 debit

      equity securities Washinton Co   320 credit

--to record year-end adjustment--

Explanation:

purchase: 160 shares x $39 each = $6,240

sale:

sold  80 shares x $45 each = 3,600

book value 80 shares x $39 = 3,120

gain on sale                                  480

year end adjustment:

book value 80 shares as $39  3,120

market value at year-end $35  2,800

unrealized loss                              320

It is unrealized as we didn't sale the shares their price could change again therefore it is not realized.

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