Question

4. ASF, Inc., holds the following portfolio of securities at December 31, X1.  All of the securities were purchased during the year.

                                                                   Cost                  Market

Magnum Hunter Resources                       $14,200               $17,000

SiriusXM                                                     6,800                  4,000

Microsoft                                                    11,500                   8,200

                                                               $32,500               $29,200

Select the entry required at December 31, 20x1 to adjust the portfolio to market (the entry to record the purchase of the investments has already been recorded).

a. Debit Realized Loss $3,300, Credit Investments $3,300

b. Debit Allowance to Adjust to Market $3,300, Credit Unrealized Gain $3,300

c. Debit Unrealized Loss $3,300, Credit Allowance to Adjust to Market $3,300

d. Debit Allowance to Adjust to Market $3,300, Credit Realized Gain $3,300

Select the entry to record the sale of all of the Magnum Hunter stock on July 2, 20x2 for $18,300.

a. Debit Cash $4,100, Credit Investments $4,100

b. Debit Cash $18,300, Credit Investments $14,200, Credit Realized Gain $4,100

c. Debit Cash $18,300, Credit Investments $17,000, Credit Realized Gain $1,300

d. Debit Cash $18,300, Credit Investments $18,300

5. On which financial statement would any unrealized gains or losses from “trading” securities be shown?

         a. Balance Sheet

         b. Income Statement

         c. Statement of Owners Equity

6. On which financial statement would any unrealized gains or losses from “available for sale” be shown?

         a. Balance Sheet

         b. Income Statement

         c. Statement of Owners Equity

Answer 1

Answer 4a
Date	General Journal	Debit	Credit
December 31, 20x1	Unrealized Loss	$              3,300
	Allowance to Adjust to Market		$              3,300
	To record the fair value adjustment. (32500-29200)
	Correct option is C.	C
Answer 4b
Date	General Journal	Debit	Credit
July 2, 20x2	Cash	$            18,300
	Realized Gain (18300-14200)		$              4,100
	Investments		$           14,200
	To record the sale of investment
	Correct option is B.	B
Answer 5
Unrealized gains or losses from “trading” securities should be shown on the income statement.
	Correct option is B.	B
Answer 6
Unrealized gains or losses from “available for sale” securities should be shown on the balance sheet.
	Correct option is A.	A