Trading Securities Fehr Finance began operations in 2018 and invests in securities held for trading. During 2018, it entered into the following trading security transactions:

Purchased 20,000 shares of \(\mathrm{ABC}\) common shares at \(\$ 38\) per share Purchased 32,000 shares of \(\mathrm{XYZ}\) common shares at \(\$ 17\) per share At December 31, 2018, ABC's common shares were trading at \(\$ 39.50\) per share and XYZ's common shares were trading at \(\$ 16.50\) per share.

Required:

1. Prepare the necessary adjusting entry to value the trading securities at fair market value.

2. CONCEPTUAL CONNECTION What is the statement of earnings effect of this adjusting entry?

OBJECTIVE (1) Exercise