At December 31, 2012, Ed & Kay Hastings Company had no investments. One equity security is purchased for $34,680 on November 15, 2013; commission costs on the purchase amount to $320. At December 31, 2013, a balance sheet date, the fair value of that security is $32,000. At December 31, 2014, the security is still held and the fair value is $40,000. The security is classified as available-for-sale in noncurrent assets. On January 15, 2015, the security is sold for a price of $42,800.
Instructions
(a) Prepare the journal entry for the purchase of the security on November 15, 2013.
(b) Prepare the appropriate adjusting entry on December 31, 2013.
(c) Describe what will appear on the 2013 financial statements with regard to this investment.
(d) Prepare the appropriate adjusting entry on December 31, 2014.
(e) Describe what will appear on the 2014 financial statements with regard to this investment.
(f) Prepare the journal entry to record the sale of the investment on January 15, 2015.
(g) Prepare the appropriate adjusting entry on December 31, 2015.
(h) Describe what will appear on the 2015 financial statements with regard to this investment.