Question

On February 15, Jewel Company buys bonds of Marcelo Corp. for $200,800. The investment is classified as available-for-sale securities. This is the company's first and only investment in available-for-sale securities. On December 31, the bonds had a fair value of $201,900. The entry to record the year-end adjustment is: Multiple Choice Debit Cash $1,100; credit Dividend Revenue $1,100. Debit Fair Value Adjustment-Available-for-Sale $1,100; credit Unrealized Gain-Equity $1,100 Debit Fair Value Adjustment-Available-for-Sale $1,100; credit Interest Revenue $1,100. Debit Fair Value Adjustment-Available-for-Sale $1,100; credit Realizeed Gain-Income $1,100 Debit Cash $1,100; credit Gain on Sale of Investments $1,100.

Answer 1

Available for sale securities are carried at Fair market value.

Unrealized gain = $201,900 - $200,800 = $1,100

The answer is Debit fair value adjustment-available for sale $1,100; Credit unrealized gain-equity $1,100