A company has purchased $250,000 of X, a material amount for the company. X is a...

A company has purchased $250,000 of X, a material amount for the company. X is a cryptocurrency token. One X token is currently worth $0.078150, over three times its value at the ICO.

1. Assume that the X purchase was made for cash. What journal entry should be made to record the purchase?

2. What (if any) journal entry would be required if the X value has increased to $300,000 at December 31, 2018?

3. What (if any) journal entry would be required if the X value has decreased to $200,000 at December 31, 2018?

Expert Solution

1)

Initially a cryptocurrency is recognized in accounting at acquisition cost, which is established based on the amount paid or payable for a cryptocurrency or the value of other transferred assets..The acquired cryptocurrency could be recorded in the accounting using the following entry

Cryptocurrency(token)	$250000
To cash account		$250000

2)

In preparing the financial statements, a cryptocurrency is measured at fair value .Profits, due to the increase in fair value, are recorded under such accounting entry:

Cryptocurrency(token)	$50000(300000-250000)
TO Gain from increase in fair value of investment		$50000

GAIN, due to the change in fair value of a financial asset, are specified in the profits/loss statement.(cr. side)

3)

In preparing the financial statements, a cryptocurrency is measured at fair value .Loss, due to the increase in fair value, are recorded under such accounting entry:

Loss from decrease in fair value of investment	$50000(250000-200000)
To Cryptocurrency (token)		$50000

loss, due to the change in fair value of a financial asset, are specified in the profits/loss statement((dr side)

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