Trading Securities Pear Investments began operations in 2020 and invests in securities classified as trading securities. During 2020, it entered into the following trading security transactions: Purchased 20,000 shares of ABC common stock at $38 per share Purchased 32,000 shares of XYZ common stock at $17 per share At December 31, 2020, ABC common stock was trading at $39.50 per share and XYZ common stock was trading at $16.50 per share. Required: 1. Prepare the necessary adjusting entry to value the trading securities at fair market value. 2. CONCEPTUAL CONNECTION What is the income statement effect of this adjusting entry?

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
Publisher: Cengage Learning
ISBN: 9781337690881
BuyFind

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
Publisher: Cengage Learning
ISBN: 9781337690881

Solutions

Chapter
Section
Chapter A2, Problem 18E
Textbook Problem

Trading Securities

Pear Investments began operations in 2020 and invests in securities classified as trading securities. During 2020, it entered into the following trading security transactions:

Purchased 20,000 shares of ABC common stock at $38 per share Purchased 32,000 shares of XYZ common stock at $17 per share

At December 31, 2020, ABC common stock was trading at $39.50 per share and XYZ common stock was trading at $16.50 per share.

Required:

1. Prepare the necessary adjusting entry to value the trading securities at fair market value.

2. CONCEPTUAL CONNECTION What is the income statement effect of this adjusting entry?

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Chapter A2 Solutions

Cornerstones of Financial Accounting
Ch. A2 - How does the consolidated balance sheet differ...Ch. A2 - What is the allowance to adjust short-term...Ch. A2 - Why is it necessary to eliminate transactions...Ch. A2 - What is the difference between an asset...Ch. A2 - What is goodwill, and how is it calculated?Ch. A2 - Investments in equity securities are deemed to be...Ch. A2 - Debt investments that management intends to sell...Ch. A2 - Which of the following is a reason businesses...Ch. A2 - Which of the following terms is not used for debt...Ch. A2 - How are held-to-maturity securities values? a....Ch. A2 - The Boss Inc. reported an unrealized gain on its...Ch. A2 - EMK Corp. is holding two bonds to maturity, both...Ch. A2 - Refer to the information for Shackley above. Which...Ch. A2 - Refer to the information for Shackley above....Ch. A2 - A2-10 JFK Inc. buys 30% of the shares outstanding...Ch. A2 - Whopper Corporation owns a 40% interest in BigMac...Ch. A2 - When the market value of a companys...Ch. A2 - What account title will not appear on consolidated...Ch. A2 - Consolidated financial statements are required: a....Ch. A2 - Assume a parent has total assets of $6,000,000 and...Ch. A2 - Goodwill is calculated as the excess of the cost...Ch. A2 - Matching Accounting Methods and Investments...Ch. A2 - Trading Securities Pear Investments began...Ch. A2 - Available-for-Sale Securities Tolland Financial...Ch. A2 - Allowance for Available-for-Sale Securities...Ch. A2 - Adjusting the Allowance to Adjust Trading...Ch. A2 - Investment in Equity Securities 200 shares of...Ch. A2 - Fair Value and Equity Methods Nadal Corporation...Ch. A2 - Fair Value Method On January 1, 2019, Miller Inc....Ch. A2 - On January 1, 2019, Hill Corporation acquired 40%...Ch. A2 - Accounting for Investments in Equity Securities On...Ch. A2 - Investments in Trading Securities Maxwell Company...Ch. A2 - Consolidated Balance Sheet Augusta Inc. acquired...Ch. A2 - Consolidated Income Statement Johnson Inc. is the...Ch. A2 - Goodwill Pindar Corporation acquired all the...

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