Part A Al Salam Company began operations in 2016. Since then, it has reported the following gains and losses for its investments in trading securities on the income statement: 2016 2017 2018 Gains (losses) from sale of trading investments $15,000 $(20,000) $14,000 Unrealized holding gains (losses) on valuation of trading investments (25,000) 10,000 (30,000) Required For Al Salam Company: Calculate the balance in the Fair Value Adjustment account at December 31, 2018 (after the adjusting entry for 2018 is made).
Part A
Al Salam Company began operations in 2016. Since then, it has reported the following gains and
losses for its investments in trading securities on the income statement:
2016 2017 2018
Gains (losses) from sale of trading investments $15,000 $(20,000) $14,000
Unrealized holding gains (losses) on valuation of trading
investments
(25,000) 10,000 (30,000)
Required
For Al Salam Company:
Calculate the balance in the Fair Value Adjustment account at December 31, 2018 (after the
adjusting entry for 2018 is made).
Part B
The following scenarios are independent from each other
1. Al Faris Corp. issued €6,000,000 par value 10% convertible bonds at 98. The liability
component alone would have been valued at 95.
2. Al Rassam Company issued €7,000,000 par value 10% bonds for €6,860,000. One share
warrant was issued with each €100 par
were selling for €4. The
3. Mazaya, Inc. had an 11%, €5,000,000 par value bonds. These bonds were converted into
500,000 shares of €1 par value ordinary shares on July 1, 2015. The carrying amount of the
debt component on July 1 was €4,800,000. The Share Premium––Conversion Equity account
had a balance of €100,000 and the company paid an additional €35,000 to the bondholders
to induce conversion of all the bonds.
Required:
For each of the above scenarios, prepare the necessary
transaction:
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