In: Accounting
At December 31, 2020, the available-for-sale debt portfolio for Teal, Inc. is as follows.
Security |
Cost |
Fair Value |
Unrealized |
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A | $25,375 | $21,750 | $(3,625 | ) | |||
B | 18,125 | 20,300 | 2,175 | ||||
C | 33,350 | 36,975 | 3,625 | ||||
Total | $76,850 | $79,025 | 2,175 | ||||
Previous fair value adjustment balance—Dr. | 580 | ||||||
Fair value adjustment—Dr. | $1,595 |
On January 20, 2021, Teal, Inc. sold security A for $21,895. The
sale proceeds are net of brokerage fees.
Prepare the adjusting entry at December 31, 2020, to report the portfolio at fair value. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Account Titles and Explanation |
Debit |
Credit |
eTextbook and Media
List of Accounts
Show the balance sheet presentation of the investment-related accounts at December 31, 2020. (Do not leave any answer field blank. Enter 0 for amounts.)
TEAL, INC |
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Accumulated other Comprehensive IncomeAccumulated other Comprehensive LossCommon StockCurrent AssetsCurrent LiabilitiesDebt InvestmentsEquity InvestmentsIntangible AssetsLong-term InvestmentsLong-term LiabilitiesAdditional Paid-in CapitalProperty, Plant and EquipmentRetained EarningsStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal Stockholders' Equity |
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Accumulated other Comprehensive IncomeAccumulated other Comprehensive LossCommon StockCurrent AssetsCurrent LiabilitiesDebt InvestmentsEquity InvestmentsIntangible AssetsLong-term InvestmentsLong-term LiabilitiesAdditional Paid-in CapitalProperty, Plant and EquipmentRetained EarningsStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal Stockholders' Equity |
$ |
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Accumulated other Comprehensive IncomeAccumulated other Comprehensive LossCommon StockCurrent AssetsCurrent LiabilitiesDebt InvestmentsEquity InvestmentsIntangible AssetsLong-term InvestmentsLong-term LiabilitiesAdditional Paid-in CapitalProperty, Plant and EquipmentRetained EarningsStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal Stockholders' Equity |
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Accumulated other Comprehensive IncomeAccumulated other Comprehensive LossCommon StockCurrent AssetsCurrent LiabilitiesDebt InvestmentsEquity InvestmentsIntangible AssetsLong-term InvestmentsLong-term LiabilitiesAdditional Paid-in CapitalProperty, Plant and EquipmentRetained EarningsStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal Stockholders' Equity |
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Accumulated other Comprehensive IncomeAccumulated other Comprehensive LossCommon StockCurrent AssetsCurrent LiabilitiesDebt InvestmentsEquity InvestmentsIntangible AssetsLong-term InvestmentsLong-term LiabilitiesAdditional Paid-in CapitalProperty, Plant and EquipmentRetained EarningsStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal Stockholders' Equity |
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Accumulated other Comprehensive IncomeAccumulated other Comprehensive LossCommon StockCurrent AssetsCurrent LiabilitiesDebt InvestmentsEquity InvestmentsIntangible AssetsLong-term InvestmentsLong-term LiabilitiesAdditional Paid-in CapitalProperty, Plant and EquipmentRetained EarningsStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal Stockholders' Equity |
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AddLess: | ||||||
Accumulated other Comprehensive IncomeAccumulated other Comprehensive LossCommon StockCurrent AssetsCurrent LiabilitiesDebt InvestmentsEquity InvestmentsIntangible AssetsLong-term InvestmentsLong-term LiabilitiesAdditional Paid-in CapitalProperty, Plant and EquipmentRetained EarningsStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal Stockholders' Equity |
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Accumulated other Comprehensive IncomeAccumulated other Comprehensive LossCommon StockCurrent AssetsCurrent LiabilitiesDebt InvestmentsEquity InvestmentsIntangible AssetsLong-term InvestmentsLong-term LiabilitiesAdditional Paid-in CapitalProperty, Plant and EquipmentRetained EarningsStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal Stockholders' Equity |
$ |
eTextbook and Media
List of Accounts
Prepare the journal entry for the 2021 sale of security A. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date |
Account Titles and Explanation |
Debit |
Credit |
Jan. 20, 2021 | |||
Answer :
(a) Preparation of the adjusting entry at December 31, 2020, to report the portfolio at fair value :
The portfolio should be reported at the fair value of $79,025. Since the cost of the portfolio is $76,850, the unrealized holding gain is $2,175, of which $580 is already recognized. Therefore, the December 31, 2020 adjusting entry should be:
Date | Account Titles and Explanation | Debit | Credit |
Securities Fair Value Adjustment (Available-for-Sale) | $1,595 | ||
Unrealized Holding Gain or Loss | $1,595 |
(b) Balance sheet presentation of the investment-related accounts at December 31, 2020 :
TEAL, INC | |
Balance Sheet | |
As of December 31, 2020 | |
Current assets: | |
Available-for-sale securities | $79,025 |
Stockholders’ equity: | |
Common stock | xxx,xxx |
Additional paid-in capital | xxx,xxx |
Retained earnings | xxx,xxx |
xxx,xxx | |
Add: Accumulated other comprehensive income | $2,175 |
Total stockholders’ equity | xxx,xxx |
(c) Journal entry for the 2021 sale of security A :
Date | Account Titles and Explanation | Debit | Credit |
Jan. 20, 2021 | Cash | $21,895 | |
Loss on Sale of Securities | $3,480 | ||
Available-for-Sale Securities | $25,375 |
Note : Calculation of Profit / (Loss) on sale of securities :
Particulars | Amount |
Net proceeds from sale of security A | $21,895 |
Cost of security A | $25,375 |
Loss on sale of stock | ($3,480) |