Determine investment classifications

Account for equality investment acquisition

Account for revenue related to equality investments

Account for changes in fair market value

Account for sale of equity investments

Excerpt from 2020 Balance Sheet:

Trading securities 130,000

Less: Securities fair value adjustment -925.00 129,075

Available for sale securities 108,000

Add: Securities fair value adjustment 10,000 118,000

Starbucks investment portfolio on December 31, 2020 consists of the following securities:

Security	Classification	Cost	FMV
1000 shares of Hotdog Co.	Trading	75000	76250
800 shares of veggie Burger Inc.	Trading	55000	52825
1000 shares of Pizza Corp.	AFS	59000	65000
2000 shares of Comdog Unlimited	AFS	49000	53000

During 2021 the following transactions took place:

March 3 - Purchased 300 additional shares of Hotdog Co. stock for $22950.

Company continued to sell in the short-term.

April 15 - Sold 400 shares of Veggie Burger stock for $69 per share.

May 4 - Sold 400 shares of Pizza Corp. for $62 per share.

October 30 - Purchased 1500 shares of French Fries Inc. stock for $83250

Nov 1 - Purchased 35% of Hartley corporation for $350000 in cash.

Net income and dividends for Hartley were $175000 and $12500, respectively.

The market values of the stocks on December 31, 2021 are as follows:

Hotdog	$76.50
Veggie Burger	68.50
French Fries	55.25
Pizza Corp.	61.00
Comdog Unlimited	27.00

Required:

1. Make all necessary journal entries to record the transactions given for 2018, including any year-end accrual or adjusting entries.

2. Show how the investments would be presented on the balance sheet at December 31, 2018. Assume that all available-for-sale securities are presented as current assets.

Answer rating: 100% (QA)

To record the transactions for 2021 the following journal entries are necessary March 3 Trading secu... View the full answer