Long-term investment in available-for-sale securities …………………. $15,000 — December 2009 Marsh Company held shares common stock its portfolio long-term investments

On December 31, 2009, Marsh Company held 1,000 shares of X Company common stock in its portfolio of long-term investments in available-for-sale securities. The stock had cost $15 per share and has a current market value of $13 per share. The December 31, 2009 balance sheet showed the following:

Assets

Long-term investment in available-for-sale securities …………………. $15,000

Less: Allowance for change in value of investment ………………….… (2,000)

$13,000

Stockholders’ Equity

Unrealized decrease in value of available-for-sale securities ………….. $ (2,000)

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During 2010 the company acquired as long-term investments 900 shares of Y Company common stock for $18 per share and 800 shares of Z Company common stock for $22 per share. At the end of 2010 the respective market values per share were: X—$14, Y—$17, and Z—$20.

Required

Record the purchase of the investments in 2010 and the adjusting entry on December 31, 2010, and show the respective December 31, 2010 balance sheet accounts.

SOLUTION

2010
During	Investment in Available-for-Sale	Investment in Available-for-Sale	Investment in Available-for-Sale	Investment in Available-for-Sale	Investment in Available-for-Sale
the	Securities	Securities	Securities	Securities	Securities	16,200	16,200	16,200	16,200
year	Cash (900 x $18)	Cash (900 x $18)	Cash (900 x $18)	Cash (900 x $18)	Cash (900 x $18)					16,200
	Investment in Available-for-Sale	Investment in Available-for-Sale	Investment in Available-for-Sale	Investment in Available-for-Sale	Investment in Available-for-Sale
	Securities	Securities	Securities	Securities	Securities	17,600	17,600	17,600	17,600
	Cash (800 x $22)	Cash (800 x $22)	Cash (800 x $22)	Cash (800 x $22)	Cash (800 x $22)					17,600
Dec. 31	Unrealized Increase/Decrease in	Unrealized Increase/Decrease in	Unrealized Increase/Decrease in	Unrealized Increase/Decrease in	Unrealized Increase/Decrease in
	Value of Available-for-Sale	Value of Available-for-Sale	Value of Available-for-Sale	Value of Available-for-Sale	Value of Available-for-Sale
	Securities	Securities	Securities	Securities	Securities	1,500	1,500	1,500	1,500
Allowance for Change in Value	Allowance for Change in Value	Allowance for Change in Value	Allowance for Change in Value	Allowance for Change in Value	Allowance for Change in Value	Allowance for Change in Value
of Investment	of Investment	of Investment					1,500*	1,500*	1,500*	1,500*	1,500*
							Cumulative	Cumulative	Cumulative	Cumulative	Cumulative
			12/31/10	12/31/10	12/31/10	12/31/10	Change in	Change in	Change in	Change in	Change in
*Security	*Security	Cost	Fair Value	Fair Value	Fair Value	Fair Value	Fair Value	Fair Value	Fair Value	Fair Value	Fair Value
X Company common stock	X Company common stock	$15,000	$14,000	$14,000			$(1,000)	$(1,000)	$(1,000)	$(1,000)	$(1,000)
Y Company common stock	Y Company common stock	16,200	15,300	15,300			(900)	(900)	(900)	(900)	(900)
Z Company common stock	Z Company common stock	17,600	16,000	16,000	16,000	16,000	(1,600)	(1,600)	(1,600)	(1,600)	(1,600)
Totals	Totals	$48,800		$45,300				$(3,500	)	)	)

$1,500 credit adjustment = $3,500 required ending credit balance - $2,000 beginning credit balance

Noncurrent assets:
Investment in available-for-sale securities (at cost)	Investment in available-for-sale securities (at cost)	Investment in available-for-sale securities (at cost)	Investment in available-for-sale securities (at cost)				$48,800	$48,800	$48,800
Less: Allowance for change in value of investment	Less: Allowance for change in value of investment	Less: Allowance for change in value of investment	Less: Allowance for change in value of investment				(3,500)	(3,500)	(3,500)	(3,500)	(3,500)
Investment in available-for-sale securities (at fair value)	Investment in available-for-sale securities (at fair value)	Investment in available-for-sale securities (at fair value)	Investment in available-for-sale securities (at fair value)	Investment in available-for-sale securities (at fair value)	Investment in available-for-sale securities (at fair value)	Investment in available-for-sale securities (at fair value)		$45,300	$45,300
Stockholders' equity:
Accumulated Other Comprehensive Income: Unrealized	Accumulated Other Comprehensive Income: Unrealized	Accumulated Other Comprehensive Income: Unrealized	Accumulated Other Comprehensive Income: Unrealized	Accumulated Other Comprehensive Income: Unrealized	Accumulated Other Comprehensive Income: Unrealized	Accumulated Other Comprehensive Income: Unrealized
decrease in value of available-for-sale securities	decrease in value of available-for-sale securities	decrease in value of available-for-sale securities	decrease in value of available-for-sale securities				$ (3,500)	$ (3,500)	$ (3,500)	$ (3,500)	$ (3,500)