Recording and Reporting AFS SecuritiesOn December 31, 2020, Banff Company held an investment in Glacier Inc. bonds with an original cost of $9,200. The investment was classified as an available-for-sale security, had a fair value of $8,600 on December 31, 2020, and was the only investment in the available-for-sale security portfolio in 2020. In 2021, Banff sold the investment in Glacier Inc. bonds for $8,000. On December 31, 2021, assume that Banff Company has an $3,200 net unrealized holding gain on other available-for-sale securities purchased during 2021.a. Prepare the adjusting entry on December 31, 2020, to record the unrealized holding gain or loss on the Glacier Inc. bond investment. DateAccount NameDr.Cr.Dec. 31, 2020 b. Prepare the adjusting entry on December 31, 2021, to record the unrealized holding gain or loss on Banff’s available-for-sale portfolio.DateAccount NameDr.Cr.Dec. 31, 2021 c. Indicate the effect on net income and other comprehensive income in 2021 for these transactions.Note: Use a negative sign to indicate a loss.Net Income2021Gain (loss) of sale of investmentAnswerOther comprehensive income2021Unrealized gain (loss)Answerd. Prepare the reclassification disclosure of accumulated other comprehensive income to include in the notes accompanying the financial statements of Banff Company for 2021.Note: Use a negative sign to indicate a loss.Accumulated other comprehensive income (loss), January 1, 2021 AnswerCurrent period other comprehensive income for AFS portfolioAnswer Reclassification adjustment on Damon common stockAnswerAnswerAccumulated other comprehensive income (loss), December 31, 2021 Answer Recording and Reporting AFS SecuritiesOn December 31, 2020, Banff Company held an investment in Glacier Inc. bonds with an original cost of $9,200. The investment was classified as an available-for-sale security, had a fair value of $8,600 on December 31, 2020, and was the onlyinvestment in the available-for-sale security portfolio in 2020. In 2021, Banff sold the investment in Glacier Inc. bonds for $8,000. On December 31, 2021, assume that Banff Company has an $3,200 net unrealized holding gain on other available-for-sale securities purchased during 2021.a. Prepare the adjusting entry on December 31, 2020, to record the unrealized holding gain or loss on the Glacier Inc. bond investment.DateAccount NameDr.Cr.Dec. 31, 2020 Cash78,000Interest Receivable78,000b. Prepare the adjusting entry on December 31, 2021, to record the unrealized holding gain or loss on Banff's available-for-sale portfolio.DateAccount NameDr.Cr.Dec. 31, 2021c. Indicate the effect on net income and other comprehensive income in 2021 for these transactions.• Note: Use a negative sign to indicate a loss.Net Income2021Gain (loss) of sale of investment $Other comprehensive income2021Unrealized gain (loss)$d. Prepare the reclassification disclosure of accumulated other comprehensive income to include in the notes accompanying the financial statements of Banff Company for 2021.• Note: Use a negative sign to indicate a loss.Accumulated other comprehensive income (loss), January 1, 2021$Current period other comprehensive income for AFS portfolioReclassification adjustment on Damon common stockAccumulated other comprehensive income (loss), December 31, 20212$

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Recording and Reporting AFS Securities On December 31, 2020, Banff Company held an investment in Glacier Inc. bonds with an original cost of $9,200. The investment was classified as an available-for-sale security, had a fair value of $8,600 on December 31, 2020, and was the only investment in the available-for-sale security portfolio in 2020. In 2021, Banff sold the investment in Glacier Inc. bonds for $8,000. On December 31, 2021, assume that Banff Company has an $3,200 net unrealized holding gain on other available-for-sale securities purchased during 2021. a. Prepare the adjusting entry on December 31, 2020, to record the unrealized holding gain or loss on the Glacier Inc. bond investment. Date Account Name Dr. Cr. Dec. 31, 2020 b. Prepare the adjusting entry on December 31, 2021, to record the unrealized holding gain or loss on Banff’s available-for-sale portfolio. Date Account Name Dr. Cr. Dec. 31, 2021 c. Indicate the effect on net income and other comprehensive income in 2021 for these transactions. Note: Use a negative sign to indicate a loss. Net Income 2021 Gain (loss) of sale of investment Answer Other comprehensive income 2021 Unrealized gain (loss) Answer d. Prepare the reclassification disclosure of accumulated other comprehensive income to include in the notes accompanying the financial statements of Banff Company for 2021. Note: Use a negative sign to indicate a loss. Accumulated other comprehensive income (loss), January 1, 2021 Answer Current period other comprehensive income for AFS portfolio Answer Reclassification adjustment on Damon common stock Answer Answer Accumulated other comprehensive income (loss), December 31, 2021 Answe

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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Recording and Reporting AFS Securities

On December 31, 2020, Banff Company held an investment in Glacier Inc. bonds with an original cost of $9,200. The investment was classified as an available-for-sale security, had a fair value of $8,600 on December 31, 2020, and was the only investment in the available-for-sale security portfolio in 2020. In 2021, Banff sold the investment in Glacier Inc. bonds for $8,000. On December 31, 2021, assume that Banff Company has an $3,200 net unrealized holding gain on other available-for-sale securities purchased during 2021.

a. Prepare the adjusting entry on December 31, 2020, to record the unrealized holding gain or loss on the Glacier Inc. bond investment.

Date	Account Name	Dr.	Cr.
Dec. 31, 2020

b. Prepare the adjusting entry on December 31, 2021, to record the unrealized holding gain or loss on Banff’s available-for-sale portfolio.

Date	Account Name	Dr.	Cr.
Dec. 31, 2021

c. Indicate the effect on net income and other comprehensive income in 2021 for these transactions.

Note: Use a negative sign to indicate a loss.

Net Income	2021
Gain (loss) of sale of investment	Answer

Other comprehensive income	2021
Unrealized gain (loss)	Answer

d. Prepare the reclassification disclosure of accumulated other comprehensive income to include in the notes accompanying the financial statements of Banff Company for 2021.

Note: Use a negative sign to indicate a loss.

Accumulated other comprehensive income (loss), January 1, 2021		Answer
Current period other comprehensive income for AFS portfolio	Answer
Reclassification adjustment on Damon common stock	Answer	Answer
Accumulated other comprehensive income (loss), December 31, 2021		Answer

Recording and Reporting AFS Securities
On December 31, 2020, Banff Company held an investment in Glacier Inc. bonds with an original cost of $9,200. The investment was classified as an available-for-sale security, had a fair value of $8,600 on December 31, 2020, and was the only
investment in the available-for-sale security portfolio in 2020. In 2021, Banff sold the investment in Glacier Inc. bonds for $8,000. On December 31, 2021, assume that Banff Company has an $3,200 net unrealized holding gain on other available-
for-sale securities purchased during 2021.
a. Prepare the adjusting entry on December 31, 2020, to record the unrealized holding gain or loss on the Glacier Inc. bond investment.
Date
Account Name
Dr.
Cr.
Dec. 31, 2020 Cash
78,000
Interest Receivable
78,000
b. Prepare the adjusting entry on December 31, 2021, to record the unrealized holding gain or loss on Banff's available-for-sale portfolio.
Date
Account Name
Dr.
Cr.
Dec. 31, 2021
c. Indicate the effect on net income and other comprehensive income in 2021 for these transactions.
• Note: Use a negative sign to indicate a loss.
Net Income
2021
Gain (loss) of sale of investment $
Other comprehensive income
2021
Unrealized gain (loss)
$
d. Prepare the reclassification disclosure of accumulated other comprehensive income to include in the notes accompanying the financial statements of Banff Company for 2021.
• Note: Use a negative sign to indicate a loss.
Accumulated other comprehensive income (loss), January 1, 2021
$
Current period other comprehensive income for AFS portfolio
Reclassification adjustment on Damon common stock
Accumulated other comprehensive income (loss), December 31, 2021
2$

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