Question

MA-6 (Static) Determining Financial Statement Effects of Trading Securities Transactions LOA-1

On January 1, 2018, Brian Company purchased at par $800,000, 6 percent bonds issued by Laura Company to be actively traded. At December 31, 2018, the bonds had a fair value of $775,000. The bond investment was sold on July 1, 2019, for $802,000. Brian Company’s fiscal year ends on December 31.
Using the following categories, indicate the effects of the transactions listed above. (Enter a positive value for an increase, negative value for a decrease, and zero for a net effect of zero.)

		balance	continued.	sheet	Income	continued.	Statement
transaction date	transaction	assets	liabilities	stockholders equity	revenues/gains	expenses/losses	net income
december 31, 2018	record trading securities at fair value		0
july 1, 2019	adjust to fair value	27,000	0	27,000	27,000		27,000
	record the sale of trading securities	0	0

Answer 1

		Balance sheet			Income statement
transaction date	transaction	assets	liabilities	stockholders equity	revenues/gains	expenses/losses	net income
January 1, 2018	record trading securities	-800000 cash +800000 Investment Net effect : 0	0	0	0	0	0
December 31 2019	Adjust to fair value	-25000 [775000-800000]	0	0	0	25000	-25000
July 1,2019	record the sale of trading securities	+802000 cash -775000 Investment Net effect : 27000	0	0	27000	0	27000