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In: Accounting

Some of Tollakson Corporation’s investment securities are classified as trading securities and some are classified as available-for-sale.

Some of Tollakson Corporation’s investment securities are classified as trading securities and some are classified as available-for-sale. The cost and fair value of each category at December 31, 2017, were as follows.

Cost Fair Value Unrealized Gain (Loss) Trading securities Available-for-sale securities $96,300 $59,000 $84,900 $63,200 $(11,400) $ 4,200

 

At December 31, 2016, the Fair Value Adjustment—Trading account had a debit balance of $3,200, and the Fair Value Adjustment—Available-for-Sale account had a credit balance of $5,750. Prepare the required journal entries for each group of securities for December 31, 2017.

Solutions

Expert Solution

Journal entries    
Unrealised Loss -Income ($11,400+$3,200) $14,600  
Fair value Adjustment - Trading   $14,600
Mark trading securities to fair value and report the adjustment in current-period income.    
     
Fair value Adjustment - available for sale (5,750+4,200) $9,950  
Unrealised Loss -Loss   $9,950
Mark available-for-sale securities to fair value and report the adjustment as a separate component of stockholders’ equity.    
Journal entries    
Unrealised Loss -Income ($11,400+$3,200) $14,600  
Fair value Adjustment - Trading   $14,600

Junaid answered 2 years ago
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