Problem 175 Metlock Company has the following securities in

Problem 17-5 Metlock Company has the following securities in its investment portfolio on December 31, 2017 (all securities were purchased in 2017): (1) 2,800 shares of Anderson Co. common stock which cost $56,000, (2) 10,500 shares of Munter Ltd. common stock which cost $588,000, and (3).6,000 shares of King Company preferred stock which cost $252,000. The Fair Value Adjustment account shows a credit of $10,600 at the end of 2017. In 2018, Metlock completed the following securities transactions. 1. On Januáry 15, sold 2,800 shares of Anderson\'s common stock at $22 per share less fees of 2. On April 17, purchased 1,000 shares of Castle\'s common stock at $34 per share plus fees of $2,320. $1,800. On December 31, 2018, the market prices per share of these securities were Munter $64, King $40 and Castle $20. In addition, the accounting supervisor of Metlock told you that, even though all these securities have readily determinable fair values, Metlock will not actively trade these securities because the top management intends to hold them for more than one year

Solution

Jan 15 2018

Cash ((2,800*$22)-$2,320) $59,280

Gain on sale of investments $3,280  

Equity investments $56,000

Apr 17 2018

Equity Investments $35,800

Cash $35,800

Unrealized Gain = $66,800

Unrealized Gain = Credit balance of Fair Value Adjustment account + Change in price = $10,600+ $56,200 = $66,800

Dec 31 2018

Fair Value Adjustment $66,800

Unrealized Holding gain $66,800

No of Shares	Cost	Market Price	Change
10500	$588,000	$672,000	$84,000
6000	$252,000	$240,000	$(12,000)
1000	$35,800	$20,000	$(15,800)
Total	$875,800	$932,000	$56,200