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Kitty Company began operations in 2016 and maintains short-term investments in trading securities. The year-end cost...

Kitty Company began operations in 2016 and maintains short-term investments in trading securities. The year-end cost and fair values for its portfolio of these investments follow.

Portfolio of Trading Securities Cost Fair Value
December 31, 2016 $ 73 $ 53
December 31, 2017 60 82
December 31, 2018 78 105
December 31, 2019 92 73


Prepare journal entries to record each December 31 year-end fair value adjustment for these above securities.

Solutions

Expert Solution

Date General Journal Debit Credit
Dec. 31, 2016 Unrealised loss - Income                             [$73 - $53] $20
     Fair value adjustment - Trading (ST) $20
Dec. 31, 2017 Fair value adjustment - Trading (ST) $42
     Unrealised gain - Income                     [($82- $60) + $20] $42
Dec. 31, 2018 Fair value adjustment - Trading (ST) $5
     Unrealised gain - Income                     [($105 - $78) - $22] $5
Dec. 31, 2019 Unrealised loss - Income                             [($92 - $73) + 27] $46
     Fair value adjustment - Trading (ST) $46

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