Loreal-American Corporation purchased several marketable securities during 2018.

Question

Loreal-American Corporation purchased several marketable securities during 2018. At December 31, 2018, the company had the investments in bonds listed below. None was held at the last reporting date, December 31, 2017, and all are considered securities available-for-sale.

Required:
1. Prepare appropriate adjusting entries at December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

2. What amounts would be reported in the income statement at December 31, 2018, as a result of these adjusting entries?

Cost Fair Value Unrealized Holding
Gain (Loss) Short term: Blair, Inc. $ 490,000 $ 400,000 $ (90,000 ) ANC Corporation 455,000 490,000 35,000 Totals $ 945,000 $ 890,000 $ (55,000 ) Long term: Drake Corporation $ 490,000 $ 565,000 $ 75,000 Aaron Industries 715,000 665,000 (50,000 ) Totals $ 1,205,000 $ 1,230,000 $ 25,000

Explanation / Answer

1) DATE Accounts title and Explanation Debit Credit 12/31/2018 Net unrealized holding gains and losses 30000 Fair value adjustmenr (55000-25000) 30000 (To record the adjustment entry for recognizing gain or loss on securities) 2) No amount should be reported in the income statement, since net unrelaized holding gains and losses are part of other comprehensive income, hence there are reported as the components in the shareholders equity

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