Accounting for Securities During 2012, the first year of its operations, Profit
ID: 2559743 • Letter: A
Question
Accounting for Securities During 2012, the first year of its operations, Profit Industries purchased the following securities:
During 2013, Profit sold one-half of security A for $8,000 and one-half of security D for $15,000.
1. Provide the journal entries required to adjust the portfolio of securities to its fair value at the end of 2012.
2. Provide the journal entries required to record the sale of security A and security D. If an amount box does not require an entry, leave it blank.
3. Provide the journal entries required to adjust the portfolio of securities to its fair value at the end of 2013.
Explanation / Answer
1)
Security A
Income summary DR 5000
Security A CR 5000
Security B
Security B DR 1000
Income summary CR 1000
Security C
Unrealised Gain/Loss - OCI DR 2000
Security C CR 2000
Security D
Security D DR 4000
Unrealised Gain/Loss - OCI CR 4000
2)
Sale of Security A
Cash DR 8000
Security A CR 6500
Income summary CR 1500
Sale of Security D
Cash DR 15000
Unrealised Gain/Loss - OCI DR 2000
Security D CR 14000
Income summary CR 3000
3)
Security A
Income summary DR 2500 (9000-6500)
Security A CR 2500
Security B
Security B DR 1000
Income summary CR 1000
Security C
Security C DR 2000
Unrealised Gain/Loss - OCI CR 2000
Security D
Unrealised Gain/Loss - OCI DR 1000 (14000-13000)
Security D CR 1000
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