1. Create a journal entry for when a Trading Security has increased in fair market value...

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?

Solutions

Expert Solution

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 .

ekkarill92 answered 1 year ago

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