Question

In: Accounting

Use the following information for the Quick Study below. [The following information applies to the questions...

Use the following information for the Quick Study below.

[The following information applies to the questions displayed below.]
  
Kitty Company began operations in the current year and acquired short-term debt investments in trading securities. The year-end cost and fair values for its portfolio of these debt investments follow.

Portfolio of Trading Securities Cost Fair Value
Tesla Bonds $ 12,600 $ 9,450
Nike Bonds 20,800 21,840
Ford Bonds 5,200 4,160

QS 15-4 Fair value adjustment to a portfolio of trading securities LO P1

Prepare journal entry to record the December 31 year-end fair value adjustment for the debt securities

Date General Journal Debit Credit
Dec 31st

Solutions

Expert Solution

Based on the information available in the question, we can record the journal entry as follows:-

Particulars Cost Fair Value
Tesla Bonds            12,600               9,450
Nike Bonds            20,800             21,840
Ford Bonds              5,200               4,160
Total            38,600             35,450

The journal entry to record the fair value adjustment is :-

December 31 Unrealized Holding Loss ($38,600 - $35,450)                       3,150
                To Fair Value Adjustment A/c                           3,150
(To record the fair value adjustement on December 31)

Please let me know if you have any questions via comments and all the best :)

ekkarill92 answered 1 year ago
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