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?
Cornerstones of Financial Accounti...
Cornerstones of Financial Accounti...
Solutions
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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