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RUDIKE [14]
3 years ago
12

Loreal-American Corporation purchased several marketable securities during 2021. At December 31, 2021, the company had the inves

tments in bonds listed below. None was held at the last reporting date, December 31, 2020, and all are considered securities available-for-sale. Cost Fair Value Unrealized Holding Gain (Loss) Short term: Blair, Inc. $ 520,000 $ 385,000 $ (135,000 ) ANC Corporation 470,000 520,000 50,000 Totals $ 990,000 $ 905,000 $ (85,000 ) Long term: Drake Corporation $ 520,000 $ 580,000 $ 60,000 Aaron Industries 700,000 680,000 (20,000 ) Totals $ 1,220,000 $ 1,260,000 $ 40,000 Required: 1. Prepare appropriate adjusting entries at December 31, 2021. 2. What amount would be reported in the income statement at December 31, 2021, as a result of the adjusting entry
Business
1 answer:
rosijanka [135]3 years ago
6 0

Answer and Explanation:

1. The adjusting entry is

Net unrealised holding gain or loss $45,000 ($85,000 - $40,000)  

        To Fair value adjustment $45,000

(being net unrealized holding gain or loss is recorded)

2. In the income statement, the amount that should be reported is zero as the net unrealized gain or loss would be reported as an other comprehensive income also it is a part of the stockholder equity

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