At the beginning of 2018, Ace Company had the following portfolio of investments in available-for-sale debt securities
Question:
At the beginning of 2018, Ace Company had the following portfolio of investments in available-for-sale debt securities (all of which were acquired at par value): Security Cost 1/1/18 Fair Value A $20,000 $25,000 B 30,000 29,000 Totals $50,000 $54,000 During 2018, 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 $800 on the B and C securities. Additionally the following information was available: Security 12/31/18 Fair Value B $34,000 C 53,000
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, 2018?
3. Next Level What justification does the FASB give for its treatment of unrealized holding gains and losses for available-for-sale securities?
Intermediate Accounting
ISBN: 978-0324659139
11th edition
Authors: Loren A. Nikolai, John D. Bazley, Jefferson P. Jones