Adjusting AFS Debt Securities to Fair Value A portfolio of investments of available-for-sale securities held by Dow Inc. is as follows. Dec. 31, 2020 Cost Fair Value Eastern Corp. bonds $204,000 $217,600 Western Corp. bonds 340,000 348,500 Total $544,000 $566,100 Dec. 31, 2021 Cost Fair Value Eastern Corp. bonds $204,000 $238,000 Western Corp. bonds 340,000 323,000 Total $544,000 $561,000 The Fair Value Adjustment account had a $0 balance on January 1, 2020. No sales or purchases took place in the available-for-sale investment portfolio in 2020 and 2021. a. Record the adjusting entry on December 31, 2020, to adjust the debt investments to fair value. Date Account Name Dr. Cr. Dec. 31, 2020 b. Record the adjusting entry on December 31, 2021, to adjust the debt investments to fair value. . Date Account Name Dr. Cr. Dec. 31, 2021 c. Indicate how the adjustment to fair value in (b) would be reflected in Dow’s income statement for the year ended December 31, 2021. Note: Indicate a loss with a negative sign. Income Statement 2021 Net gain (loss) on investment ?????
Adjusting AFS Debt Securities to Fair Value A portfolio of investments of available-for-sale securities held by Dow Inc. is as follows. Dec. 31, 2020 Cost Fair Value Eastern Corp. bonds $204,000 $217,600 Western Corp. bonds 340,000 348,500 Total $544,000 $566,100 Dec. 31, 2021 Cost Fair Value Eastern Corp. bonds $204,000 $238,000 Western Corp. bonds 340,000 323,000 Total $544,000 $561,000 The Fair Value Adjustment account had a $0 balance on January 1, 2020. No sales or purchases took place in the available-for-sale investment portfolio in 2020 and 2021. a. Record the adjusting entry on December 31, 2020, to adjust the debt investments to fair value. Date Account Name Dr. Cr. Dec. 31, 2020 b. Record the adjusting entry on December 31, 2021, to adjust the debt investments to fair value. . Date Account Name Dr. Cr. Dec. 31, 2021 c. Indicate how the adjustment to fair value in (b) would be reflected in Dow’s income statement for the year ended December 31, 2021. Note: Indicate a loss with a negative sign. Income Statement 2021 Net gain (loss) on investment ?????
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 19E
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Adjusting AFS Debt Securities to Fair Value
A portfolio of investments of available-for-sale securities held by Dow Inc. is as follows.
| Dec. 31, 2020 | Cost | Fair Value |
|---|---|---|
| Eastern Corp. bonds | $204,000 | $217,600 |
| Western Corp. bonds | 340,000 | 348,500 |
| Total | $544,000 | $566,100 |
| Dec. 31, 2021 | Cost | Fair Value |
|---|---|---|
| Eastern Corp. bonds | $204,000 | $238,000 |
| Western Corp. bonds | 340,000 | 323,000 |
| Total | $544,000 | $561,000 |
The Fair Value Adjustment account had a $0 balance on January 1, 2020. No sales or purchases took place in the available-for-sale investment portfolio in 2020 and 2021.
a. Record the| Date | Account Name | Dr. | Cr. |
|---|---|---|---|
| Dec. 31, 2020 | |||
b. Record the adjusting entry on December 31, 2021, to adjust the debt investments to fair value.
.
| Date | Account Name | Dr. | Cr. |
|---|---|---|---|
| Dec. 31, 2021 | |||
c. Indicate how the adjustment to fair value in (b) would be reflected in Dow’s income statement for the year ended December 31, 2021.
Note: Indicate a loss with a negative sign.
| Income Statement | 2021 |
|---|---|
| Net gain (loss) on investment | ????? |
Transcribed Image Text:Adjusting AFS Debt Securities to Fair Value
A portfolio of investments of available-for-sale securities held by Dow Inc. is as follows.
Dec. 31, 2020
Cost
Fair Value
Eastern Corp. bonds $204,000
$217,600
Western Corp. bonds
340,000
348,500
Total
$544,000
$566,100
Dec. 31, 2021
Cost
Fair Value
Eastern Corp. bonds $204,000
$238,000
Western Corp. bonds
340,000
323,000
Total
$544,000
$561,000
The Fair Value Adjustment account had a $0 balance on January 1, 2020. No sales or purchases took place in the available-for-sale investment portfolio in 2020 and 2021.
a. Record the adjusting entry on December 31, 2020, to adjust the debt investments to fair value.
Date
Account Name
Dr.
Cr.
Dec. 31, 2020
b. Record the adjusting entry on December 31, 2021, to adjust the debt investments to fair value.
Date
Account Name
Dr.
Cr.
Dec. 31, 2021
c. Indicate how the adjustment to fair value in (b) would be reflected in Dow's income statement for the year ended December 31, 2021.
Note: Indicate a loss with a negative sign.
Income Statement
2021
Net gain (loss) on investment $
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