Question

At December 31, 2018, Atlanta Company has an equity portfolio valued at $160,000. Its cost was $132,000. If the Securities Fair Value Adjustment has a debit balance of $8,000, which of the following journal entries is required at December 31, 2018

Answer 1

Answer:

The Journal entry is as follows:

Fair value adjustment A/c       Dr. $20,000

To unrealized holding gain or loss-income    $20,000

(To record the adjustment)

Workings:

Ending balance = equity portfolio value - cost

                          = $160,000 - $132,000

                          = $28,000

Necessary Adjustment = Ending balance - Beginning balance

                                      = $28,000 - $8,000

                                      = $20,000