Question

on December 31, Lujack Co. held the following short-term available-for-sale securities. Lujack had no short-term investments prior to the current period. Prepare the December 31 year-end adjusting entry to racord the fair value adjustment for these debt securities. Exercise 15-5 Fair value adjustment to available-for-sale debt securities Available-for-Sale Securities Nintendo Co. notes......... Atlantic bonds........ Kellogg Co. notes ............ McDonald's Corp, bonds. Cost $44,450 49,000 25,000 46,300 Fair Value $48,900 47.000 23,200 44,800 in aynilahlr-for-sale debt Exercise 15-6

exercise 15-5 please

Answer 1

The following table is required for calculation:

Securities	Cost	Fair value	Difference
N.C. Notes	44,450	48,900	(4,450)
A.Bonds	49,000	47,000	2,000
K.C. Notes	25,000	23,200	1,800
M.C. Bonds	46,300	44,800	1,500
Total			850

Required entry is as below

Journal

Date	Account titles and explanations	Ref.	Debit	Credit
Dec.31	Investment available for sale of N.C. Notes		$4,450
	Investment available for sale of A. Bonds			$2,000
	Investment available for sale of K.C. Notes			$1,800
	Investment available for sale of M.C. Bonds			$1,500
	Gain on securities available for sale			$850
	To record the fair value adjustment at the year-end.

Note: all positive differences in the table indicate credit amounts, and the only negative difference of $4,450 indicates a debit amount; the balance figure is the gain, which is also credit.