At the beginning of 2019, Ace Company had the following portfolio of investments in available-for-sale debt securities (all of which were acquired at par value):

During 2019, the following transactions occurred:
May 3 Purchased C debt securities at their par value for $50,000.
July 1 Sold all of the A securities for $25,000 plus interest of $1,000.
Dec. 31 Received interest of $7,600 on the B and C securities. Additionally the following information was available:
...............................12/31/2019
Security..................Fair Value
B ...............................$29,000
C .................................52,500

Required:
1. Prepare journal entries to record the preceding information.
2. What is the balance in the Unrealized Holding Gain/Loss account on December 31, 2019?
3. Next Level What justification does the FASB give for its treatment of unrealized holding gains and losses for available-for-sale securities?

Transcribed Image Text:

1/1/2019 Fair Value Cost Security $25,000 29,000 $54,000 $20,000 30,000 $50,000 Totals