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Assume that Jerome's available-for-sale portfolio had a total cost of $50,000 and a fair value of $46,000 on December 31 at the end of the first year it held the AFS securities . Make the necessary adjusting entry.

Sagot :

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Answer:

Sep.15

Dr Investments in Available for sale securities 8900

Cr Cash 8900

30-Dec

Dr Other Comprehensive Income -(Unrealised loss-AFS) 4000

Cr Fair value adjustment-Stock 4000

31-Dec

Dr Fair value adjustment-Stock 1000

Cr Unrealised gain-Income 1000

Explanation:

Preparation of the journal entries

Books of Jerome Inc.

Sep.15

Dr Investments in Available for sale securities 8900

Cr Cash 8900

(Purchase of Notes of Topper Inc.)

30-Dec

Dr Other Comprehensive Income -(Unrealised loss-AFS) 4000

Cr Fair value adjustment-Stock 4000

(50000-46000)

31-Dec

Dr Fair value adjustment-Stock 1000

Cr Unrealised gain-Income 1000

(6000-5000)

(Unrealised holding period gain on Melina corporation stock hed as Trading securities)

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