Question

In: Accounting

ABC Corporation’s available for sale securities portfolio consisted of the following common stocks.                          &nb

  1. ABC Corporation’s available for sale securities portfolio consisted of the following common stocks.

                                                Cost             Fair Value

Paws Corporation                  $ 50,000         $ 50,000

Ace Inc.                                      68,000             58,000

Trevor Corporation                     81,000             76,400

Instructions: Record any necessary journal entries assuming the fair value account had a credit balance of $5,000 prior to this entry.

Solutions

Expert Solution

ABC Corporation :
Let us find the Fair Value adjustments required
Stock Cost Fair value Adjsutment against cost
Paws Corporation $             50,000 $              50,000 $                         -  
Ace Inc $             68,000 $              58,000 $               (10,000)
Trevor Corporation $             81,000 $              76,400 $                 (4,600)
Total $               (14,600)
So the required Fair value adjsutment against cost is = $       (14,600.00)
Fair Value adjustment credit balance =$5000
So the required Debut to Fair Value a/c is = $        19,600.00
Adjsuting Journal entry
Account Title Dr $ Cr $
Unrealized Gain/Loss -Other Comprehensive Income Account                 19,600
Available for Sale Securities                   19,600

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