Presented below is information related to the purchases of common stock by Lilly Company during 2020. Cost(at purchase date)Fair Value(at December 31)Investment in Arroyo Company stock$100,000$ 80,000Investment in Lee Corporation stock 250,000 300,000Investment in Woods Inc. stock 180,000 190,000Total$530,000$570,000 In addition, assume that the investment in the Woods Inc. stock was sold during 2021 for $195,000. At December 31, 2021, the following information relates to its two remaining investments of common stock. Cost(at purchase date)Fair Value(at December 31)Investment in Arroyo Company stock$100,000$140,000Investment in Lee Corporation stock 250,000 310,000Total$350,000$450,000Net income before any security gains and losses for 2021 was $905,000.Instructionsa. Compute the amount of net income or net loss that Lilly should report for 2021, taking into consideration Lilly's security transactions for 2021.b. Prepare the journal entry to record unrealized gain or loss related to the investment in Arroyo Company stock at December 31, 2021.

Investment may be defined as the allocation of amount into such avenues, financial instruments or…

Answered: a. Compute the amount of net income…

Intermediate Accounting: Reporting And Analysis

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ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

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Chapter16: Retained Earnings And Earnings Per Share

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Presented below is information related to the purchases of common stock by Lilly Company during 2020.

	Cost (at purchase date)	Fair Value (at December 31)
Investment in Arroyo Company stock	$100,000	$ 80,000
Investment in Lee Corporation stock	250,000	300,000
Investment in Woods Inc. stock	180,000	190,000
Total	$530,000	$570,000

In addition, assume that the investment in the Woods Inc. stock was sold during 2021 for $195,000. At December 31, 2021, the following information relates to its two remaining investments of common stock.

	Cost (at purchase date)	Fair Value (at December 31)
Investment in Arroyo Company stock	$100,000	$140,000
Investment in Lee Corporation stock	250,000	310,000
Total	$350,000	$450,000

Net income before any security gains and losses for 2021 was $905,000.

Instructions

Compute the amount of net income or net loss that Lilly should report for 2021, taking into consideration Lilly's security transactions for 2021.

Prepare the journal entry to record unrealized gain or loss related to the investment in Arroyo Company stock at December 31, 2021.

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