Question

During the current year, Reed Consulting Group acquired long-term available-for-sale securities at a $70,000 cost. At its December 31 year-end, these securities had a fair value of $58,000. This is the first and only time the company purchased such securities.Prepare the necessary year-end adjusting entry related to these securities.

Answer 1

Answer:

Account                                             Debit                             Credit

Unrealized loss (Equity)                    $12,000

Fair Value adjustment (Avaliable                                         $12,000

for sale)

Explanation:

Given Data:

Long-term available-for-sale securities=$70,000

December 31, Securities fair values=$58,000

Required:

The necessary year-end adjusting entry related to these securities.

Solution:

Unrealized Loss occurred=$70,000-$58,000

unrealized Loss occurred=$12,000

Adjusting entry:

Account                                             Debit                             Credit

Unrealized loss (Equity)                    $12,000

Fair Value adjustment (Avaliable                                         $12,000

for sale)