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3 years ago

Storm, Inc. purchased the following available-for-sale securities during 2016, its first year of operations:

Business

1 answer:

prisoha [69]3 years ago

5 0

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).

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