Question

Fair Value Journal Entries, Trading Investments Storm, Inc. purchased the following trading securities during 2049, its first year of operations: Name Number of Shares Cost Dust Devil, Inc. 1,900 $81,700 Gale Co. 850 68,000 Whirlwind Co. 2,850 114,000 Total $263,700 The market price per share for the trading security portfolio on December 31, 2049, was as follows: Market Price per Share, Dec. 31, 2019 Dust Devil, Inc. $40 Gale Co. 75 Whirlwind Co. 42 a. Provide the journal entry to adjust the trading security portfolio to fair value on December 31, 2019. If an amount box does not require an entry, leave it blank 2019 Dec. 31 b. Is there any impact of December 31, 2049 Journal entry on the income statement? of the any unrealized gain/loss is reported

Answer 1

Cost Fair Value 81,700 76,000 Particulars Dust devil Inc Gale Co Whirlwind Co. Total 63,750 68,000 114,000 263,700 119,700 259,450 Loss is = $ 4,250 (263700-259450) Note:- Fair value = Shares outstanding Market price per share Debit s Credits a) Adjustment entry :: Date Account title & Descritpion 31/12/2019 Unrealized gain (loss) on trading securities To Valuation allowance for trading securities (Entry for Adjustment of trading securities to fair value) 4,250 4,250 b) There will be no impact in Income Statement. Unrealized gain (loss) on trading securities is reported in stockholders equity section of Balance sheet. No, Stockholders equity, balance sheet