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yawa3891 [41]
3 years ago
10

The investments of Steelers Inc. include a single investment: 11,100 shares of Bengals Inc. common stock purchased on September

12, Year 1, for $12 per share including brokerage commission. These shares were classified as available-for-sale securities. As of the December 31, Year 1, balance sheet date, the share price declined to $10 per share. a. Journalize the entries to acquire the investment on September 12 and record the adjustment to fair value on December 31, Year 1. Year 1 Sept. 12 Year 1 Dec. 31 b. How is the unrealized gain or loss for available-for-sale investments disclosed on the financial statements
Business
1 answer:
mihalych1998 [28]3 years ago
5 0

Answer:

Steelers Inc.

a) Journal entries:

Sept. 12

Debit Available for Sale Investment $133,200

Credit Cash Account $133,200

To record investments in the common stock of Bengals Inc., 11,110 shares at $12 per share.

Dec. 31:

Debit Unrealized Loss on Available for Sale Investment $22,200

Credit Available for Sale Investment $22,200

To record the fair value of the investment.

b) The unrealized gains and losses are included in other comprehensive income within the equity section of the balance sheet.

The loss will, therefore, be deducted from other comprehensive income.

Explanation:

Investments held for sale are accounted for at fair value.  This implies that at the end of any accounting period, the fair value of the investments will be determined.  This is usually the market value.  Then, adjustments are made in the asset account according to the fair value.  There will be recognized either unrealized gain or loss, which are taken to other comprehensive income in the balance sheet under the equity section.

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