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15 June, 07:20

Buffalo Co. had purchased 160 shares of Washington Co. for $39 each this year (Oregon Co. does not have significant influence). Buffalo Co. sold 80 shares of Washington Co. stock for $45 each. At year-end, the price per share of the Washington Co. stock has dropped to $35.

Required:

Prepare the journal entries for these transactions and any year-end adjustments.

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  1. 15 June, 07:26
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    equity securities Washinton Co 6,240 debit

    cash 6,240 credit

    --to record the purchase--

    cash 3,600 debit

    gain on equity securities 480 credit

    equity securities Washinton Co 3,120 credit

    --to record sale--

    unrealized loss 320 debit

    equity securities Washinton Co 320 credit

    --to record year-end adjustment--

    Explanation:

    purchase: 160 shares x $39 each = $6,240

    sale:

    sold 80 shares x $45 each = 3,600

    book value 80 shares x $39 = 3,120

    gain on sale 480

    year end adjustment:

    book value 80 shares as $39 3,120

    market value at year-end $35 2,800

    unrealized loss 320

    It is unrealized as we didn't sale the shares their price could change again therefore it is not realized.
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