Answer:
a. See the table below.
b. Debit Fair value adjustment - Available-for-sale for $47,981; and Credi Unrealized gain - Debt for $47,981.
Explanation:
1. Identify whether each investment should be classified as a short-term or long-term investment. For each investment, indicate in which of the six investment classifications it should be placed.
This can be done as follows:
<u>No.      Types of investment           Classification of investment           </u>
a.         Long-term investment         Debt investment held to maturity 
b.         Long-term investment         Equity method investments 20%-50% 
c.         Long-term investment         Available for sale dbt securities 
d,         Long-term investment         Available for sale dbt securities 
e.         Short-term investment        Stock investment <20% 
2. Prepare a journal entry dated December 31 to record the fair value adjustment for the portfolio of available-for-sale debt securities. Carperk had no available-for-sale debt securities prior to this year.
The journal entries will look as follows:
<u>General Journal                                               Debit ($)           Credit ($)  </u>
Fair value adjustment - Available-for-sale     47,981
Unrealized gain - Debt (w.1)                                                        47,981
<em><u>(To record the fair value adjustment for the portfolio of available-for-sale debt securities).  </u></em>
<u>Workings (w.1):</u>
No      Fair Value ($)       Cost ($)         Gain (loss) ($) 
                     A                       B                   C = A - B 
a.              453,116            416,850               36,266 
c.             184,240            170,909                 13,331 
d.           <u>   93,426   </u>        <u>   95,042 </u>                <u>  (1,616) </u>
Total      <u>  730,782 </u>        <u>  682,801 </u>            <u>   47,981 </u>