Question

On December 31, a Company held the following short-term available-for-sale securities. The Company had no short-term investments prior to the current period. Prepare the December 31 year-end adjusting entry to record the fair value adjustment for these debt securities.

Answer 1

1a. Unrealized amount 850

1b.Dr Unrealized holding loss-AFS 850

Cr Fair value adjustment 850

Step-by-step explanation:

1a. Computation for fair value adjustment

Available for sale securities Cost -Fair value =Unrealized amount

Nintendo Co notes 44450-48900=4450

Atlantic Bonds 49000-47000=-2000

Kelogg Co notes25000-23200=-1800

Mcdonals Corp bonds46300-44800= -1500

Total 164750-163900= -850

1b. The Adjusting Journal entry

Dr Unrealized holding loss-AFS 850

Cr Fair value adjustment 850

(To record adjusting entry)