S&L Financial buys and sells securities expecting to earn profits on short-term
ID: 2329809 • 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 $885,000 and sold the bonds on January 3, 2019, for $892,500. At December 31, the bonds had a fair value of $878,000.
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
(a).
Date
Accounts Title & Explanation
Debit
Credit
2018
Dec. 31
Unrealized Holding Loss - OCI
$7000
Trading Securities
$7000
(For adjusting fair value of the securities)
(b).
Date
Accounts Title & Explanation
Debit
Credit
2019
Jan. 3
Cash
$892500
Trading Securities
$878000
Unrealized Holding Loss - OCI
$7000
Realized Gain on Trading Securities
$7500
(For recording sale of trading securities)
Date
Accounts Title & Explanation
Debit
Credit
2018
Dec. 31
Unrealized Holding Loss - OCI
$7000
Trading Securities
$7000
(For adjusting fair value of the securities)
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