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.)

Cost Fair Value Unrealized Holding
Gain (Loss) Short term: Blair, Inc. $ 504,000 $ 393,000 $ (111,000 ) ANC Corporation 462,000 504,000 42,000 Totals $ 966,000 $ 897,000 $ (69,000 ) Long term: Drake Corporation $ 504,000 $ 572,000 $ 68,000 Aaron Industries 708,000 672,000 (36,000 ) Totals $ 1,212,000 $ 1,244,000 $ 32,000

Explanation / Answer

Short-term investments are marked to market, and any declines or increases in value are recognized as a loss or profit.

Available for sale long-term investments are recorded at cost when purchased and subsequently adjusted to reflect their fair values at the end of the reporting period. Unrealized holding gains or losses are kept as "other comprehensive income" until the long-term investment has been sold.

1. Unrealised loss on Bond 111000

to Bond (Blair) A/c 111000

2. Bond (ANC) A/c 42000
to Unrealised Profit on Bond 42000

3. Bond (Drake) A/c 68000

to Unrealised Gain (Other Comprehensive Income) 68000

4. Unrealised Loss (Other Comprehensive Income) 36000

to Bond (Aaron) 36000

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