E17-4 (LO1) (Entries for Available-for-Sale Securities) Assume the same information as

in E17-3* except that the securities are classified as available-for-sale. The fair value of
the bonds at December 31 of each year-end is as follows.

2017 $320,500 2020 $310,000

2018 $309,000 2021 $300,000
2019 $308,000    
Instructions
(a)Prepare the journal entry at the date of the bond purchase.
(b)Prepare the journal entries to record the interest revenue and recognition of fair
value for 2017.
(c)Prepare the journal entry to record the recognition of fair value for 2018.

(a) January 1, 2017

Available-for-Sale Securities .................................... 322,744.44
Cash......................................................................... 322,744.44
(b) December 31, 2017
Cash................................................................................. 36,000
Available-for-Sale Securities ............................. 3,725.56
Interest Revenue ($322,744.44 X .10)............ 32,274.44
Securities Fair Value Adjustment
(Available-for-Sale).................................................. 1,481.12
Unrealized olding Gain or Loss
Equity ($320,500.00 – $319,018.88) ........... 1,481.12
(c) December 31, 2018

Unrealized Holding Gain or Loss—Equity .................... 7,401.89

Securities Fair Value Adjustment (Available-for-Sale)................ 7,401.89

Amortized Cost (Available-for-sale bonds) $314,920.77

Fair Value $309,000.00
Unrealized Holding Gain (Loss) $(5,920.77)
Available-for-sale bonds
Previous securities fair value adjustment debit 1,481.12
Securities fair value adjustment credit $(7,401.89)
E17-9 (LO1) (Available-for-Sale Debt Securities Entries and Financial Statement
Presentation) At December 31, 2017, the available-for-sale debt portfolio for Steffi Graf,
Inc. is as follows.
Security Cost Fair Value Unrealized Gain (Loss)
A $17,500 $15,000 ($2,500)
B    12,500    14,000    1,500
C   23,000   25,500    2,500
Total $53,000 $54,500    1,500
Previous fair value adjustment balance—       400
Dr.
Fair value adjustment—Dr.    $1,100
On January 20, 2018, Steffi Graf, Inc. sold security A for $15,100. The sale proceeds are
net of brokerage fees.
Instructions
(a)Prepare the adjusting entry at December 31, 2017, to report the portfolio at fair
value.
Securities Fair Value Adjustment
(Available-for-Sale).............................................................. 1,100
Unrealized Holding Gain or Loss—Equity .............. 1,100

(b)Show the balance sheet presentation of the investment-related accounts at

December 31, 2017. (Ignore notes presentation.)

STEFFI GRAF, INC.

Balance Sheet
As of December 31, 2017
_____________________________________________
Current assets:
Available-for-sale securities $54,500
Stockholders’ equity:
Common stock ??
Additional paid-in capital ??
Retained earnings ??
??
Add: Accumulated other comprehensive income 1,500
Total stockholders’ equity $??

(c)Prepare the journal entry for the 2018 sale of security A.

January 20, 2018

Cash......................................................................................... 15,100
Loss on Sale of Securities................................................ 2,400
 Available-for-Sale Securities .................................. 17,500
E17-12 (LO2,3) (Journal Entries for Fair Value and Equity Methods) The following are
two independent situations.
Situation 1:Conchita Cosmetics acquired 10% of the 200,000 shares of common stock of
Martinez Fashion at a total cost of $13 per share on March 18, 2017. On June 30,
Martinez declared and paid $75,000 cash dividends to all stockholders. On December
31, Martinez reported net income of $122,000 for the year. At December 31, the market
price of Martinez Fashion was $15 per share.
Situation 2:Monica, Inc. obtained significant influence over Seles Corporation by buying
30% of Seles's 30,000 outstanding shares of common stock at a total cost of $9 per
share on January 1, 2017. On June 15, Seles declared and paid cash dividends of
$36,000 to all stockholders. On December 31, Seles reported a net income of $85,000
for the year.
Instructions
Prepare all necessary journal entries in 2017 for both situations.
Situation 1
March 18, 2017
Available-for-Sale Securities ................................................ 260,000
Cash..................................................................................... 260,000

June 30, 2017

Cash ................................................................................................. 7,500
Dividend Revenue ($75,000 X 10%) .............................. 7,500

December 31, 2017

Securities Fair Value Adjustment
(Available-for-Sale)................................................................. 40,000
Unrealized Holding Gain or Loss—Equity.................. 40,000*
*($15 – $13) X 20,000 shares = $40,000

Situation 2
January 1, 2017
Investment in Seles Corp. Stock ............................................ 81,000
Cash [(30,000 X 30%) X $9].............................................. 81,000

June 15, 2017

Cash ($36,000 X 30%)................................................................. 10,800
Investment in Seles Corp. Stock ................................... 10,800

December 31, 2017

Investment in Seles Corp. Stock (30% X $85,000)….................. 25,500
Revenue from Investment................................................ 25,500