Question

In: Accounting

Investment in Trading Securities The Coca-Cola Company’s December 31, 2013, balance sheet reports investments in trading...

Investment in Trading Securities The Coca-Cola Company’s December 31, 2013, balance sheet

reports investments in trading securities at $372 million, with net unrealized gains of $12 million.

Required

a. How much did Coca-Cola pay for the trading securities reported on its 2013 balance sheet?

b. Where are unrealized gains and losses on trading securities reported in Coca-Cola’s nancial

statements?

c. Assume the trading securities on hand at the end of 2013 were acquired during 2013. Prepare the

summary journal entries made by Coca-Cola to record events related to these trading securities.

d. Assume the securities are sold for $370 million in 2014. Prepare the journal entry to record the sale.

Solutions

Expert Solution

Solution:

a) Amount paid for trading securities = Year End Balance Sheet Value - Net unrealized gain = $372 million - $12 million = $360 Million.

b) Unrealized Gain is reported in Income Statement and secondly same value is adjusted to trading securities in Balance Sheet.

c) Journal Entries at the time of investment and unrealized gain

Date Account title and explanation Debit Credit
2013 Trading Securities-Coca-Cola Company $ 360,000,000
Cash $ 360,000,000
( Being Investments made in trading securities)
2013 Trading Securities-Coca-Cola Company $    12,000,000
Unrealized gain on trading securities $    12,000,000
( Being Unrealized gain recorded)

d) Journal Entries at the time of securities sell

Date Account title and explanation Debit Credit
2014 Cash $ 370,000,000
Realized loss on trading securities $       2,000,000
Trading Securities-Coca-Cola Company $ 372,000,000
( Being trading securities sold and loss realized)

Note:

1) According to trading securities accounting, any change in value of investment at year end will be adjusted to investment value and such gain or loss will be recorded in income statement.

ekkarill92 answered 2 years ago
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