Answer:
The Journal entries are as follows:
(a) the purchase of the investment,
Investment in trading securities A/c Dr. $55,000
To cash $55,000
(To record purchase of the investment)
(b) the interest received,
(i) Interest receivable A/c Dr. $2,200
To interest on investment $2,200
(To record the interest received)
(ii) Cash A/c Dr. $2,200
To Interest receivable $2,200
(To record the interest income received)
(c) the fair value adjustment,
Unrealized loss- trading securities A/c Dr. $2,500
To Investment in trading securities $2,500
(To record the Unrealized loss when adjusted to fair value)
Workings:
Unrealized loss:
= Book value of the investment - Fair value of the investment
= $55,000 - $52,500
= $2,500
