At the beginning of 2019, Ace Company had the following portfolio of investments in available-for-sale debt securities (all of which were acquired at par value): Security Cost 1/1/2019 Fair Value A $20,000 $25,000 B 30,000 29,000 Totals $50,000 $54,000 During 2019, the following transactions occurred: Transactions: 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 and C securities. Additionally the following information was available: Security 12/31/19 Fair Value B $29,000 C 52,500 Required: 1. Prepare journal entries to record the preceding information. 2. What is the balance in the Unrealized Holding Gain/Loss account on December 31, 2019?
At the beginning of 2019, Ace Company had the following portfolio of investments in available-for-sale debt securities (all of which were acquired at par value): Security Cost 1/1/2019 Fair Value A $20,000 $25,000 B 30,000 29,000 Totals $50,000 $54,000 During 2019, the following transactions occurred: Transactions: 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 and C securities. Additionally the following information was available: Security 12/31/19 Fair Value B $29,000 C 52,500 Required: 1. Prepare journal entries to record the preceding information. 2. What is the balance in the Unrealized Holding Gain/Loss account on December 31, 2019?
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 9E
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Question
At the beginning of 2019, Ace Company had the following portfolio of investments in available-for-sale debt securities (all of which were acquired at par value):
| Security | Cost | 1/1/2019 Fair Value |
| A | $20,000 | $25,000 |
| B | 30,000 | 29,000 |
| Totals | $50,000 | $54,000 |
During 2019, the following transactions occurred:
| Transactions: | ||
| 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 and C securities. Additionally the following information was available: |
|
Security
|
12/31/19 Fair Value
|
| B | $29,000 |
| C | 52,500 |
Required:
| 1. | Prepare |
| 2. | What is the balance in the Unrealized Holding Gain/Loss account on December 31, 2019? |
Expert Solution
Step 1
Available-for-sale securities: These are the investment in securities that are intended to be sold before maturity. The unrealized gain/(loss) on valuing such securities at the fair value on the balance sheet date is recorded under other comprehensive income account which is shown under the heading shareholders’ equity in the balance sheet.
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