Question

(Equity Investment) Oregon Co. had purchased 200 shares of Washington Co. for \(40 each this year (Oregon

Co. does not have significant influence). Oregon Co. sold 100 shares of Washington Co. stock for \)45 each. At year-end, the price

per share of the Washington Co. the stock had dropped to $35.

Instructions

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

Short answer

Gain on the sale of the equity investment is $500

Unrealized holding loss on shares is $500

Step-by-step solution

Definition of Profit on sale

Profit on sale in share means when the share is sold for greater than the amount they purchased for.

Journal entries for the transactions

Date	Particulars	Debit	Credit
a	Equity Investment (200 * $40)	$8,000
	Cash		$8,000
	(Entry of purchase of 200 shares)
b	Cash ($45 * 100)	$4,500
	Equity Investment (100 * $40)		$4,000
	Gain on sale of shares		$500
	(Being 200 shares sold for $45 each)
c	Unrealized Holding Loss	$500
	Fair Value Adjustment		$500
	(Being unrealized loss in holding shares)