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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.
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 |
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