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On its December 31, 2017 balance sheet, Free Company appropriately reported a $10,000 debit balance in...

On its December 31, 2017 balance sheet, Free Company appropriately reported a $10,000 debit balance in its Fair Value Adjustment (available-for-sale) account. There was no change during 2018 in the composition of Free’s portfolio of debt investments held as available-for-sale securities. The following information pertains to that portfolio: Security Cost Fair value at 12/31/18 X $125,000 $160,000 Y 100,000 85,000 Z 175,000 125,000 $400,000 $370,000 What is the balance of the AOCI account due to debt investments in Stockholder's Equity at 12/3/12018?

Select one: a. $30,000 credit b. $10,000 credit c. $0 d. $40,000 credit e. $10,000 debit f. $30,000 debit g. $40,000 debit

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Answer #1
Date Accounts Debit Credit
31-Dec-18 Fair value adjustment a/c Dr (40000-370000) $30,000.00
To Available for sale securities a/c Cr $30,000.00

Balance of the AOCI account due to debt investments in Stockholder's Equity at 12/3/12018 = $30000 + 10000 = $40000 Debit

Option g. $40,000 debit is correct answer.

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