Exercise 12-13 Classification of securities; adjusting entries [LO12-4] On February 18, 2018, Union Corporation purchased $1,311,000...
Exercise 12-13 Classification of securities; adjusting entries [LO12-4]
On February 18, 2018, Union Corporation purchased $1,311,000 of
IBM bonds. Union will hold the bonds indefinitely, and may sell
them if their price increases sufficiently. On December 31, 2018,
and December 31, 2019, the market value of the bonds was $1,273,000
and $1,330,000, respectively.
Required:
2. & 3. Prepare the adjusting entry for
December 31, 2018 and 2019. (If no entry is required for a
transaction/event, select "No journal entry required" in the first
account field.)
Homework Answers
Journal
| Date | Account title | Debit | Credit |
| Dec.31, 2018 | Unrealized holding loss | 38,000 | |
| Fair value adjustment | 38,000 | ||
| Dec. 31, 2019 | Fair value adjustment | 57,000 | |
| Unrealized holding gain | 57,000 |
Unrealized holding loss on December 31, 2018 = Purchase price of bonds - Market value of bonds on December 31, 2018
= 1,311,000 - 1,273,000
= $38,000
Unrealized holding gain on December 31, 2019 = Market value of bonds on December 31, 2019 - Market value of bonds on December 31, 2018
= 1,330,000 - 1,273,000
= $57,000
Kindly comment if you need further assistance. Thanks
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Exercise 12-13 Classification of securities; adjusting entries
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