Fender Co. purchased short-term investments in available-for-sale securities at a cost of $100,000 on November 25, 2011. At December 31, 2011, these securities had a fair value of $94,000. This is the first and only time the company has purchased such securities.
1. Prepare the December 31, 2011, year-end adjusting entry for the securities’ portfolio.
2. For each account in the entry for part 1, explain how it is reported in financial statements.
3. Prepare the April 6, 2012, entry when Fender sells one-half of these securities for $52,000.