Question

Problem 15-1A Recording and adjusting trading debt securities LO P1 Kirkland Company had no trading debt securities prior to this year. It had the following transactions this year involving trading debt securities. Aug. Sept. Oct. 2 Purchased Verizon bonds for $10,000. 7 Purchased Apple bonds for $35,000. 12 Purchased Mastercard bonds for $20,000. 21 Sold some of its Verizon bonds that had cost $2,000 for $2,100 cash. 23 Sold some of its Apple bonds that had cost $15,000 for $15, 400 cash. 1 Purchased Walmart bonds for $40,000. 10 Sold all of its Mastercard bonds for $18,000 cash. Nov. Dec. Required 1. Prepare journal entries to record these transactions. 2. Prepare a table to compare the year-end cost and fair values of its trading debt securities. Year-end fair values: Verizon, $8,500; Apple, $22,000; and Walmart, $39,000. 3. Prepare the adjusting entry to record the year-end fair value adjustment for the portfolio of trading debt securities.

Answer 1

2.

	Cost	Fair Value	Unrealized amount
Verizon Bonds	8000	8500
Apple bonds	20000	22000
Walmart bonds	40000	39000
Total	68000	69500	1500

3.

Date	Account Title	Debit	Credit
Dec 1	Fair value adjustment- Trading	1500
	Unrealized Gain or loss - Income		1500