In: Accounting
1. Create a journal entry for when a Trading Security has increased in fair market value by $150,000. Which financial statements are affected and how are the financial statements affected? 2. Create a journal entry for when a Available-For-Sale Security has decreased in fair market value by $85,000. Which financial statements are affected and how are the financial statements affected? 3. What journal entries are required for when a company is changing their accounting policy from LIFO to FIFO?
1) Trading Security A/c Dr $150,000
To Unrealised gain on trading securities $150,000
Balance sheet and Income statement will be effected.
In Balance sheet of the Company , Security will be increased By $1,50,000 and Income Statement will show Other Income $ 1,50,000
2) Unrealised Loss on available for sale securities Dr $85,0000
to Valuation allowance for available for sale securities $85,0000
Only Balance sheet will be effected. Loss or gain will be adjusted directly to the availabe for sale securities
3) Disclosure in Note to account to be provided, when a company is changing their accounting policy from LIFO to FIFO .