Loreal-American Corporation purchased several marketable securities during 2018.
ID: 2566522 • Letter: L
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 Unrealized Holding Cost Fair Value Gain (Loss) $ (114,000) $ (71,000) $ 67,000 $ 33,000 Short term: Blair, Inc ANC Corporation $ 506,000 392,000 463,000 506,000 43,000 Totals $ 969,000 898,000 Long term: Drake Corporation 506,000 573,000 673,000 $1,213,000 $1,246,000 Aaron Industries 707,000 34,000) Totals Required: 1. Prepare appropriate adjusting entries at December 31, 2018. (If no entry is required for a transaction/event, select "No ournal entry required" in the first account field.)Explanation / Answer
(1).
Date
Account Titles & Explanation
Debit
Credit
2018
December 31
Unrealized Holding Loss
114000
Marketable Securities
114000
(For recording securities at fair value and Unrealized Holding Loss)
December 31
Marketable Securities
43000
Unrealized Holding Gain
43000
(For recording securities at fair value and Unrealized Holding Gain)
December 31
Marketable Securities
67000
Unrealized Holding Gain
67000
(For recording securities at fair value and Unrealized Holding Gain)
December 31
Unrealized Holding Loss
34000
Marketable Securities
34000
(For recording securities at fair value and Unrealized Holding Loss)
(2).
As per rule, till the time of sale amount of unrealized holding gain (loss) can not be reported in the Income Statement. Hence in given question no amount will be shown in the Income Statement at December 31, 2018.
Given unrealized holding gain (loss) will be shown in the balance sheet under shareholders’ equity as ‘Other Comprehensive Income’.
When these securities will be sold then realized gain (loss) will be reported in Income Statement.
Date
Account Titles & Explanation
Debit
Credit
2018
December 31
Unrealized Holding Loss
114000
Marketable Securities
114000
(For recording securities at fair value and Unrealized Holding Loss)
December 31
Marketable Securities
43000
Unrealized Holding Gain
43000
(For recording securities at fair value and Unrealized Holding Gain)
December 31
Marketable Securities
67000
Unrealized Holding Gain
67000
(For recording securities at fair value and Unrealized Holding Gain)
December 31
Unrealized Holding Loss
34000
Marketable Securities
34000
(For recording securities at fair value and Unrealized Holding Loss)
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.