S&L Financial buys and sells securities which it classifies as available-for-sal

Question

S&L Financial buys and sells securities which it classifies as available-for-sale. 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, and S&L has the intent and ability to hold the investment until fair value recovers. Prepare journal entries to record(a) any unrealized gains or losses occurring in 2018 and (b) the sale of the bonds in 2019, including recognition of any unrealized gains in 2019 prior to sale and reclassification of amounts out of OCI. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 2 4 Record the entry for fair value adjustment of December 31, 2018. Note: Enter debits before credits. Date General Journal Debit Credit December 31, 2018 Record entry Clear entry View general journal

Explanation / Answer

Available for sale securities decrease in value journal entry Date Particulars Debit Credit 31-Dec-18 Unrealized gain/loss – other comprehensive income 2000 Available for sale securities 2000 (Being unrealised loss recognised) Sales of available for sale securities journal entry Date Particulars Debit Credit 3-Jan-19 Cash $ 880,000 Available for sale securities $     873,000 Unrealized gain/loss – other comprehensive income $         2,000 Realized gain on available for sale securities $         5,000 (Being unrealised loss recognised)

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