Question: (Equity Securities—Statement Presentation) Fernandez Corp. invested its excess cash in securities during2017. As of December 31, 2017, the securities portfolio consisted of the following common stocks.

Security Quantity Cost Fair Value

Lindsay Jones, Inc. 1,000 shares \( 15,000 \) 21,000

Poley Corp. 2,000 shares 40,000 42,000

Arnold Aircraft 2,000 shares 72,000 60,000

Totals \(127,000 \)123,000

Instructions

(a) What should be reported on Fernandez’s December 31, 2017, balance sheet relative to these securities? What should bereported on Fernandez’s 2017 income statement?

On December 31, 2018, Fernandez’s securities portfolio consisted of the following common stocks.

Security Quantity Cost Fair Value

Lindsay Jones, Inc. 1,000 shares \( 15,000 \)20,000

Lindsay Jones, Inc. 2,000 shares 33,000 40,000

Duff Company 1,000 shares 16,000 12,000

Arnold Aircraft 2,000 shares 72,000 22,000

Totals \(136,000 \)94,000

During the year 2018, Fernandez Corp. sold 2,000 shares of Poley Corp. for \(38,200 and purchased 2,000 more shares of

Lindsay Jones, Inc. and 1,000 shares of Duff Company.

(b) What should be reported on Fernandez’s December 31, 2018, balance sheet? What should be reported on Fernandez’s2018 income statement?

On December 31, 2019, Fernandez’s securities portfolio consisted of the following common stocks.

Security Quantity Cost Fair Value

Arnold Aircraft 2,000 shares \)72,000 \(82,000

Duff Company 500 shares 8,000 6,000

Totals \)80,000 \(88,000

During the year 2019, Fernandez Corp. sold 3,000 shares of Lindsay Jones, Inc. for \)39,900 and 500 shares of Duff Companyat a loss of $2,700.

(c) What should be reported on the face of Fernandez’s December 31, 2019, balance sheet? What should be reported onFernandez’s 2019 income statement?

Step by step solution

01

Preparation of balance sheet and income statement for the year 2017

Partial Balance Sheet
Fernandez Corp.
December 31, 2017
Assets:
Equity Investment (Fair Value)	$123,000

Income Statement for December 31, 2017

Fernandez Corp.
Income Statement (Partial)
December 31, 2017
Particular	Amount
Other Expenses and Loses:
Unrealized Holding loss	$4,000

02

Preparation of balance sheet and income statement for the year 2018

Partial Balance Sheet
Fernandez Corp.
December 31, 2018
Assets:
Equity Investment (Fair Value)	$94,000

Income Statement for December 31, 2017

Fernandez Corp.
Income Statement (Partial)
December 31, 2018
Particular	Amount
Other Expenses and Loses:
Unrealized Holding loss	$38,000
Loss on sale of investment	$1,800

03

Preparation of balance sheet and income statement for the year 2019 

Partial Balance Sheet
Fernandez Corp.
December 31, 2019
Assets:
Equity Investment (Fair Value)	$88,000

Income Statement for December 31, 2017

Fernandez Corp.
Income Statement (Partial)
December 31, 2019
Particular	Amount
Other Expenses and Loses:
Unrealized Holding loss	$46,000
Loss on sale of investment	$10,800

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