Answer:
As per accounting standards available-for-sale securities are recorded at fair value through profit and loss account or other comprehensive income. We assume that company choose to record it at fair value through profit and loss account.
The answer of each requirement is given below.
a. Provide the journal entry to adjust the available-for-sale security portfolio to fair value on December 31, 2016
Loss on valuation $ 4,250
Investment Cost $ 4,250
Working
Dust Devil, Inc. = 40 * 1900 = 76,000 - 81,700 = -5,700
Gale Co. = 75 * 850 = 63,750 - 68,000 = -4,250
Whirlwind Co. = 42 * 2850 = 119,700 - 114,000 = 5,700
Profit/ (Loss) = (4,250)
b. Is there any impact of December 31, 2016 journal entry on the income statement
The company income for the year will be reduced by ($ 4,250).
