On December 31, 2018, JD Company has the following investments in its investment portfolio (all investments were purchased in 2018):
(1) 3,000 ordinary shares of Francis Co. which cost $72,400,
(2) 12,500 ordinary shares of Dawkins Ltd. which cost $537,500, and
(3) 5,000 preference shares of Lambert Company which cost $171,000.
The Fair Value Adjustment account shows a credit of $18,630 at the end of 2018.
In 2019, JD completed the following investment transactions.
1. On February 1, sold 3,400 ordinary shares of Francis at $25 per share less fees of $4,196.
2. On August 14, purchased 2,000 ordinary shares of Wynter at $28.40 per share plus fees of $2,130.
On December 31, 2019, the fair values per share of these investments were: Dawkins $47, Lambert $28.50, and Wynter $32. JD classifies these investments as trading.
(a) Prepare the entry for the sale on February 1, 2019.
(b) Prepare the journal entry to record the purchase on August 14, 2019.
(c) Compute the unrealized gains or losses and prepare the adjusting entry for JD on December 31, 2019.
(d) How should the unrealized gains or losses be reported on JD’s financial statements?
(e) Assuming the investment in Lambert Company preference shares is classified as non-trading, briefly describe the accounting and reporting of this investment.