Trading and AFS Investments, Impairment On its January 1, 2013, balance sheet, E

Question

Trading and AFS Investments, Impairment On its January 1, 2013, balance sheet, Ericsson Corporation reports the following balances related to its investments: Trading investments AFS Investments Accumulated other comprehensive income (unrealized losses on AFS investments) $89,600 (48,000) During 2013, (1) Ericsson sold for $68,800 trading securities carried at $64,000 on its beginning balance sheet. (2) It sold the remaining trading securities held at the beginning of the year for $32,000. (3) It purchased trading securities costing $96,000; (4) their fair value at the end of 2013 was $83,200. (5) Ericsson sold for $83,200 AFS securities carried at $80,000, with unrealized gains of $1,600 included in the beginning AOCI balance. It did not purchase any new AFS securities. (6) At the end of 2013, AFS securities with a book value of $136,000 have a fair value of $140,800. (7) It is determined that AFS securities with a book value of $40,000 and unrealized losses of s8,000 have a fair value of $16,000; this decline in value is determined to be other-than-temporary. Prepare journal entries to record the events of 2013, and determine the balances related to trading and AFS securities reported on Ericsson's income statement and balance sheet. General Journal Ref. Description Debit Credit (1) Cash 68,80 Investment in trading securities 0 64,00v Gain on sale of trading securities (income) # 04,800 (2) Cash 32,00 Investment in trading securities 0 25,60 Gain on sale of trading securities (income) # 0?6,400 (3) Investment in trading securities 96,001 Cash 0 96,00 v (4) Loss on trading securities (income) 12,80 Investment in trading securities 012,80

Explanation / Answer

Accumulated OCI Opening Balance -48000 Less : Reclassification of Gain on AFS Securities -1600 Add: Gain on AFS Securities 4800 Add: Reclassification of Loss on AFS Securities 8000 Clg Balance of accumulated OCI -36800 Net Gains(Losses) on sale of trading securities 4800+6400-12800 (1,600) Net Gains(Losses) on sale of AFS securities 4800 4,800 Impairment Loss of AFS Securities -32000 (32,000) Net Gains(Losses) on sale of trading securities and AFS Securities (28,800)

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