Problem 130

Perez Company began operations in 2013. Since then, it has reported the following gains and losses for its investments in trading securities on the income statement:

2013 2014 2015
Gains (losses) from sale of trading securities $14,900 $(20,700) $14,000
Unrealized holding losses on valuation of trading securities (25,700) ― (14,400)
Unrealized holding gain on valuation of trading securities ― 10,300 ―

At January 1, 2016, Perez owned the following trading securities:

BKD Common (16,000 shares) $464,000
LRF Preferred (1,700 shares) 178,500
Drake Convertible bonds (100 bonds) 116,000

During 2016, the following events occurred:

1. Sold 5,300 shares of BKD for $180,200.
2. Acquired 900shares of Horton Common for $39 per share. Brokerage commissions totaled Brokerage commissions totaled $1,000.

At 12/31/16, the fair values for Perez’s trading securities were:

BKD Common, $28 per share
LRF Preferred, $110 per share
Drake Bonds, $1,030 per bond
Horton Common, $44 per share
Compute the balance in the Fair Value Adjustment (trading) account at December 31, 2015 (after the adjusting entry for 2015 is made).

Balance in fair value adjustment account $

Compute the aggregate cost and fair values for Perez’s trading securities portfolio at 12/31/16.

Aggregate cost $
Aggregate fair value $

Prepare the necessary adjusting entry based upon your analysis in (b) above. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.)

Account Titles and Explanation


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