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 1/1/19 Fair Value A $45,000 $56,000 B 68,000 65,000 Totals $113,000 $121,000 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 $56,000 plus interest of $1,000. Dec. 31 Received interest of $1,000 on the B and C securities. Additionally the following information was available: Security 12/31/19 Fair Value B $75,000 C 53,000 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? 3. Next Level What justification does the FASB give for its treatment of unrealized holding gains and losses for available-for-sale securities?
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 1/1/19 Fair Value A $45,000 $56,000 B 68,000 65,000 Totals $113,000 $121,000 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 $56,000 plus interest of $1,000. Dec. 31 Received interest of $1,000 on the B and C securities. Additionally the following information was available: Security 12/31/19 Fair Value B $75,000 C 53,000 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? 3. Next Level What justification does the FASB give for its treatment of unrealized holding gains and losses for available-for-sale securities?
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
|
1/1/19 Fair Value
|
| A | $45,000 | $56,000 |
| B | 68,000 | 65,000 |
| Totals | $113,000 | $121,000 |
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 $56,000 plus interest of $1,000. |
| Dec. | 31 | Received interest of $1,000 on the B and C securities. Additionally the following information was available: |
|
Security
|
12/31/19 Fair Value
|
| B | $75,000 |
| C | 53,000 |
Required:
| 1. | Prepare |
| 2. | What is the balance in the Unrealized Holding Gain/Loss account on December 31, 2019? |
| 3. | Next Level What justification does the FASB give for its treatment of unrealized holding gains and losses for available-for-sale securities? |
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