S&L Financial buys and sells securities expecting to earn profits on short-term
ID: 2328525 • Letter: S
Question
S&L Financial buys and sells securities expecting to earn profits on short-term differences in price. On December 27, 2018, S&L purchased Coca-Cola bonds at par for $875,000 and sold the bonds on January 3, 2019, for $880,000. At December 31, the bonds had a fair value of $873,000.
Prepare journal entries to record (a) any unrealized gains or losses occurring in 2018 and (b) the sale of the bonds in 2019. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Explanation / Answer
Date Account Titles and Explanation Debit Credit Dec. 31, 2018 Unrealized holding loss - NI 2000 Fair value adjustment (Trading) 2000 ($875000 - $873000) (To record trading investments at fair value) Jan. 3, 2019 Cash 880000 Fair value adjustment (Trading) 2000 Realized gain on sale of investments 7000 Trading investment 875000 (To record sale of trading investments)
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