1.         On November 1, 2020, a U.S. company invests in debt securities at a cost of $2,000,000. On December 31, 2020, the securities have a market value of $1,890,000. The securities are sold on February 1, 2021, for $2,005,000.

Required

a.         Assume the company classifies the securities as trading securities. Prepare the journal entries on December 31, 2020 and February 1, 2021 to record the above information.

b.         Repeat Part a., but this time assume the securities are classified as available-for-sale, and the 2020 decline in value is due to changes in market interest rates.

Answer rating: 100% (QA)

a Journal entries for trading securities On December 31 2020 Loss on Trading Sec... View the full answer