Question

S&L Financial buys and sells securities expecting to earn profits on short-term differences in price. On December 27, 2021, S&L purchased Coca-Cola bonds at par for $886,000 and sold the bonds on January 3, 2022, for $892,500. At December 31, the bonds had a fair value of $882,000. Prepare journal entries to record (a) any unrealized gains or losses occurring in 2021 and (b) the sale of the bonds in 2022. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 2 3 Record the unrealized gains or losses occurring at year end. Note: Enter debits before credits. General Journal Debit Credit Date December 31, 2021 Record entry Clear entry View general Journal

Answer 1

1. Unrealized gains or losses occurring at the year end:

Date	General Journal	Debit	Credit
December 31, 2021	Unrealized Loss on Coca-Cola Bonds	4000
	To Coca-Cola Bonds		4000
	(Being Unrealized loss booked on decrease in value of Coca-Cola Bonds ($886000-$882000)

2. Unrealized gains or losses occurring on the date of sale:

Date	General Journal	Debit	Credit
January 3, 2022	No journal entry required

3. Recording of sale of Coca-Cola Bonds in 2022:

Date	General Journal	Debit	Credit
January 3, 2022	Cash or Cash Equivalent	892500
	To Unrealized Loss on Coca-Cola                Bonds		4000
	To Realized Gain on Coca-Cola                Bonds (Balancing figure)		6500
	To Coca-Cola Bonds		882000
	(Being realized gain recognized and unrealized loss adjusted on sale of Coca-Cola Bonds)

Notes:-

1. All amounts are in $.