Second National Insurance Company provided this information for its minority-passive equity securities:

Required:

1. Provide the journal entries to record the fair value adjustment on December 31, 20X1. Assume that Second National uses an account entitled Fair value adjustment minority- passive equity securities to adjust the cost of the portfolio to year-end fair values. Show supporting calculations in good form.

2. Provide the entry to record the sale of Company B’s common shares on July 1, 20X2. Assume that the last fair value adjustment for these shares was on December 31, 20X1.

3. Provide the journal entry and supporting calculations for the fair value adjustment on December 31, 20X2.

Transcribed Image Text:

Fair Values Date Acquisition Security Acquired Cost 12/31/X1 12/31/X2 Company A Common Company B Common Company C Preferred Company D Common 1/15/XI 6/30/X1 2/1/X2 5/1/X2 $50,000 30,000 20,000 10,000 $60,000 25,000 $55,000 13,000* 25,000 12,000