S&L Financial buys and sells securities expecting to earn profits on short-term

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.) View transaction list Journal entry worksheet Record the unrealized gains or losses occurring at year end. Note: Enter debits before credits. Date General Journal Debit Credit December 31, 2018 Record entry Clear entry View general journal

Explanation / Answer

a)net unrealized holding loss(db) 873000-875000=2000
fair value adjustment(cr)2000

b)cash(db) 880000
gain on investments(cr) 5000
Coco cola shares(cr)875000

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