Question
In: Accounting
On January 1, Glide Company had the following portfolio of investments in available-for-sale debt securities: Original ...
On January 1, Glide Company had the following portfolio of investments in available-for-sale debt securities:
Original Fair Value Holding Gain or Sold prior to
Securities: Cost Jan 1st Loss on Jan 1st Dec 31st ?
ACE $20,000 $24,000 $4,000 YES
CHA 40,000 - - - - NO
During the year the following transactions occurred:
May 1 à Purchased CHA debt securities at par value for $40,000
July 1 à Sold all the ACE securities for $25,000 plus accrued interest of $1,000
Dec 31 à Received interest of $2,500 on CHA debt securities, additionally, at December 31, the market value (fair value) of CHA (bought on May 1 for $40,000) was now $38,000
Required:
Prepare the journal entries to record the acquisition of CHA in May
Prepare the journal entries to record the sale of ACE in July
Prepare the journal entries to record the interest received in December
Prepare the journal entries for the year-end marked valuation adjustment
Solutions
Expert Solution
| Journal Entry | |||
| Date | Particulars | Dr. Amt. | Cr. Amt. |
| 1-May | Investment in CHA Debt Securities (AFS) | 40,000.00 | |
| Cash | 40,000.00 | ||
| (record the purchase of CHA Securities) | |||
| 1-Jul | Cash | 26,000.00 | |
| Investment in Ace Securities | 20,000.00 | ||
| Interest Revenue | 1,000.00 | ||
| Gain on Sale of Securities | 5,000.00 | ||
| (record the sale of Ace securities) | |||
| 31-Dec | Cash | 2,500.00 | |
| Interest Revenue | 2,500.00 | ||
| (record the interest recd on CHA Securities) | |||
| 31-Dec | Unrealized Holding Gain (Loss) | 6,000.00 | |
| Fair Value Adjustment (AFS) | 6,000.00 | ||
| (Record the Fair Value adjustment) | |||
| Cost | Fair Value | Difference | |
| CHA Securities | 40,000.00 | 38,000.00 | (2,000.00) |
| Unrealized Gain (Loss) | (2,000.00) | ||
| Previous Fair Value Adjustment | 4,000.00 | ||
| Fair Value Adjustment | (6,000.00) |
ekkarill92 answered 1 year agoRelated Solutions
At the beginning of 2016, Ace Company had the following portfolio of investments in available-for-sale securities...
At the beginning of 2016, Ace Company had the following
portfolio of investments in available-for-sale securities (common
stock):
Security
Cost
12/31/15 Fair Value
A
$19,000
$22,500
B
32,000
30,000
Totals
$51,000
$52,500
During 2016, the following transactions occurred:
May
3
Purchased C securities (common
stock) for $14,500.
July
16
Sold all of the A securities for
$22,500.
Dec.
31
Received dividends of $650 on the B
and C securities, for which the following information was
available:
Security
12/31/16 Fair Value...
At the beginning of 2018, Ace Company had the following portfolio of investments in available-for-sale debt...
At the beginning of 2018, Ace Company had the following
portfolio of investments in available-for-sale debt securities (all
of which were acquired at par value):
Security
Cost
1/1/2018 Fair Value
A
$20,000
$25,000
B
30,000
29,000
Totals
$50,000
$54,000
During 2018, the following transactions occurred:
May
3
Purchased C debt securities at
their par value for $50,000.
July
1
Sold all of the A securities for
$25,000 plus interest of $1,000.
Dec.
31
Received interest of $7,600 on the
B...
At the beginning of 2018, Ace Company had the following portfolio of investments in available-for-sale debt...
At the beginning of 2018, Ace Company had the following
portfolio of investments in available-for-sale debt securities (all
of which were acquired at par value):
Security
Cost
1/1/2018 Fair Value
A
$20,000
$25,000
B
30,000
29,000
Totals
$50,000
$54,000
During 2018, the following transactions occurred:
May 3
Purchased C debt securities at their par value for
$50,000.
July 1
Sold all of the A securities for $25,000 plus interest of
$1,000.
Dec. 31
Received interest of $7,600 on the B...
At the beginning of 2018, Ace Company had the following portfolio of investments in available-for-sale debt...
At the beginning of 2018, Ace Company had the following
portfolio of investments in available-for-sale debt securities (all
of which were acquired at par value):
Security
Cost
1/1/18 Fair Value
A
$45,000
$56,000
B
68,000
65,000
Totals
$113,000
$121,000
During 2018, the following transactions occurred:
May 3
Purchased C debt securities at their par value for
$50,000.
July 1
Sold all of the A securities for $56,000 plus interest of
$1,000.
Dec. 31
Received interest of $1,000 on the B...
At the beginning of 2018, Ace Company had the following portfolio of investments in available-for-sale debt...
At the beginning of 2018, Ace Company had the following
portfolio of investments in available-for-sale debt securities (all
of which were acquired at par value):
Security
Cost
1/1/2018 Fair Value
A
$20,000
$25,000
B
30,000
29,000
Totals
$50,000
$54,000
During 2018, the following transactions occurred:
May 3
Purchased C debt securities at their par value for
$50,000.
July 1
Sold all of the A securities for $25,000 plus interest of
$1,000.
Dec. 31
Received interest of $7,600 on the B...
At the beginning of 2018, Ace Company had the following portfolio of investments in available-for-sale debt...
At the beginning of 2018, Ace Company had the following
portfolio of investments in available-for-sale debt securities (all
of which were acquired at par value):
Security
Cost
1/1/2018 Fair Value
A
$20,000
$25,000
B
30,000
29,000
Totals
$50,000
$54,000
During 2018, the following transactions occurred:
May 3
Purchased C debt securities at their par value for
$50,000.
July 1
Sold all of the A securities for $25,000 plus interest of
$1,000.
Dec. 31
Received interest of $7,600 on the B...
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securities classified as available for sale?
3. Under what circumstances are long-term investments in debt
securities reported at cost and adjusted for amortization of any
difference between cost and maturity value?...
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Hurricane Inc. purchased a portfolio of available-for-sale
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Total Cost
Total Fair Value
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At the end of 2018, Terry Company prepared the following schedule of investments in available-for-sale debt...
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12/31/18 Fair Value
Cumulative Change in Fair Value
Morgan Company
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$29,200
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53,200
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