Question

. Complete the required tasks utilizing excel and label everything. All work must be shown

FKG Inc. carries the following debt and equity securities on its books at December 31, 2020. All securities were purchased during 2020.

Trading Securities

Company                                                                   Cost                            Fair Value, 12/31/20        Fair Value, 12/31/21

Company A Investment                                      $ 25,000                $ 13,000                                  $ 20,000

Company B Investment                                      $ 13,000                $ 20,000                                  $ 20,000

Company C Investment                                      $ 35,000                $30,000                                   $ 25,000

Available-for-Sale Securities

Company                                                                     Cost                          Fair Value, 12/31/20        Fair Value, 12/31/21

Company X Investment                                      $210,000              $130,000                                $ 50,000

Company Y Investment                                       $ 50,000                $60,000                                   $ 70,000

Required:

Prepared ALL the necessary journal entries for FKG on December 31, 2020 AND December 31, 2021 What net effect would the valuation of these debt and equity investments have on 2020 net income? What net effect would the valuation of these debt and equity investments have on 2021 net income?

Answer 1

1.

2020:
Unrealized holding loss on investments	12,000
Investment in A		12,000
Investment in B	7,000
Unrealized holding gain on investments		7,000
Unrealized holding loss on investments	5,000
Investment In C		5,000
Unrealized holding loss on investments	80,000
Investment in X		80,000
Investment in Y	10,000
Unrealized holding gain on investments		10,000
2021:
Investment in A	7,000
Unrealized holding gain on investments		7,000
NO ENTRY FOR B SHARES
Unrealized holding loss on investments	5,000
Investment in C		5,000
Unrealized holding loss on investments	80,000
Investment in X		80,000
Investment in Y	10,000
Unrealized holding gain on investments		10,000

2. Year 2020

Net Income would be reduced by $10,000 due to the net unrealized loss on trading securities on companies A, B, and C

3. Year 2021

Net Income would be increased by $2,000 due to the net unrealized gain on trading securities on companies A, B, and C

The holding gains and losses on the securities available for sale are reported as a separate component of shareholders' equity on the balance sheet and do not affect the income statement.