On June 30, 2016, Slick Rocks, Inc., purchased 9,700 shares of Sandstone stock for $15 per share. Assume that Slick Rocks management purchased the Sandstone stock for the trading securities portfolio. The following information pertains to the price per share of Sandstone stock:
| Price | |||
| 12/31/2016 | $ | 19 | |
| 12/31/2017 | 14 | ||
| 12/31/2018 | 21 | ||
Slick Rocks sold all of the Sandstone stock on February 14, 2019, at a price of $23 per share.
Prepare any journal entries that are required by the facts presented in this case.
June 30, 2016: Investments in TS = (9,700 shares × $15) = $145,500
Computations:
| Year | Fair Value | − | Book Value before Adjustment | = | Amount for Adjusting Entry | |||||||||
| 2016 | $184,300 | − | $145,500 | = | + | $38,800 | ||||||||
| ($19 × 9,700 shares) | ($15 × 9,700 shares) | |||||||||||||
| 2017 | 135,800 | − | 184,300 | = | − | 48,500 | ||||||||
| ($14 × 9,700 shares) | (from prior fair value) | |||||||||||||
| 2018 | 203,700 | − | 135,800 | = | + | 67,900 | ||||||||
| ($21 × 9,700 shares) | (from prior fair value) | |||||||||||||
February 14, 2019: Cash = (9,700 shares × $23) = $223,100
Note: The net unrealized gains (losses) is an income statement account. This item is reported on the current income statement and affects the computation of net income. It is closed to Retained Earnings at the end of each year.
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