On March 17, 2013, Union Corporation purchased 5,000 shares of AZQ common stock as a long-term investment at $40 per share.
On December 31, 2013, and December 31, 2014, the market value of the AZQ stock is $42 and $43, respectively.
(1.) What is the appropriate reporting category for this stock? Why?
(2.) Prepare the adjusting entry on December 31, 2013.
(3.) Prepare the adjusting entry on December 31, 2014.
Investments are presented in the asset section of the balance sheet. Investment is subsequently measured at fair value. Changes in the fair value are reported in the profit or loss.
Answer and Explanation:
a. The appropriate reporting for this stock is the Fair Value Model. Investments are measured at fair value.
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from Corporate Finance: Help & ReviewChapter 2 / Lesson 6