Parnevik Company has the following investments in its investment portfolio on December 31, 2010 (all investments were purchased in 2010): (1) 3,000 ordinary shares of Anderson Co. which cost $58,500, (2) 10,000 ordinary shares of Munter Ltd. which cost $580,000, and (3) 6,000 preference shares of King Company which cost $255,000. The Securities Fair Value Adjustment account shows a credit of $10,100 at the end of 2010. In 2011, Parnevik completed the following investment transactions.
1. On January 15, sold 3,000 ordinary shares of Anderson at $22 per share less fees of $2,150.
2. On April 17, purchased 1,000 ordinary shares of Castle at $33.50 per share plus fees of $1,980.
On December 31, 2011, the fair values per share of these investments were: Munter $61, King $40, and Castle $29. Parnevik classifies these investments as trading.

(a) Prepare the entry for the sale on January 15, 2011.
(b) Prepare the journal entry to record the purchase on April 17, 2011.
(c) Compute the unrealized gains or losses and prepare the adjusting entry for Parnevik on December 31, 2011.
(d) How should the unrealized gains or losses be reported on Parnevik’s financial statements?
(e) Assuming the investment in King Company preference shares is classified as non-trading; briefly describe the accounting and reporting of this investment.

  • CreatedJune 17, 2013
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