Question

 S&L Financial buys and sells securities expecting to earn profits on short-term differences in price. On December 27, 2021, S&L purchased Coca-Cola bonds at par for $886,000 and sold the bonds on January 3, 2022, for $892,500. At December 31, the bonds had a fair value of $882,000.

 Prepare journal entries to record (a) any unrealized gains or losses occurring in 2021 and (b) the sale of the bonds in 2022. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

SOLUTION:

Date	Particulars	Debit	Credit
31-Dec-21	Unrealized holding loss-NI	4,000
	Fair value adjustment (886,000 - 882,000)
			4,000
03-Jan-22	Fair value adjustment	6,500
	Unrealized holding loss-NI (892,500 - 886,000)		6,500
03-Jan-22	Cash	892,500
	Iinvestment in Coca-cola bonds		886,000
	Fair value adjustment		6,500