In: Accounting
The following information shows Carperk Company’s individual investments in securities during its current year, along with the December 31 fair values.
Required:
1. Identify whether each investment should be
classified as a short-term or long-term investment. For each
investment, indicate in which of the six investment classifications
it should be placed.
2. Prepare a journal entry dated December 31 to
record the fair value adjustment for the portfolio of
available-for-sale debt securities. Carperk had no
available-for-sale debt securities prior to this year.
a) | |||
Type of Investment | Classification of Long-term Investment | ||
a. Long term investment |
Debt investments Held to maturity | ||
b. Long term investment | Equity method investments 20%-50% | ||
c. Long term investment | Available for sale debt securities | ||
d. Long term investment | Available for sale debt securities | ||
e. Short term investments | stock investments <20% | ||
Part 2. | |||
GENERAL JOURNAL | DR | CR | |
Fair value adjustment - Available for sale | 47,325.00 | ||
Unrealized gain - debt | 47,325.00 | ||
Cost | Fairvalue | Gain/(loss) | |
a) | 420,500.00 | 457,000.00 | 36,500.00 |
c) | 165,500.00 | 178,000.00 | 12,500.00 |
d) | 90,300.00 | 88,625.00 | (1,675.00) |
Total | 676,300.00 | 723,625.00 | 47,325.00 |
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