At the beginning of $2018,$ Ace Company had the following portfolio of investments in available$-$for$-$sale debt securities $($all of which were acquired at par value$)$:

Security

Cost

$1/1/18$ Fair Value

A $$15,000$ $$19,000$

B $23,00022,000$

Totals $$38,000$ $$41,000$

During $2018,$ the following transactions occurred:

May $3$ Purchased C debt securities at their par value for $$45,000.$

July $1$ Sold all of the A securities for $$19,000$ plus interest of $$1,000.$

Dec. $31$ Received interest of $$1,000$ on the B and C securities$.$ Additionally the following information was available:

Security

$12/31/18$ Fair Value

B $$26,000$

C $47,000$

Required:

$1.$ Prepare journal entries to record the preceding information.

$2.$ What is the balance in the Unrealized Holding Gain$/$Loss account on December $31,2018?$

$3.$ Next Level What justification does the FASB give for its treatment of unrealized holding gains and losses for available$-$for$-$sale securities$?$

CHART OF ACCOUNTS

Ace Company

General Ledger

ASSETS

$111$ Cash

$114$ Investment in Available$-$for$-$Sale Securities

$119$ Allowance for Change in Fair Value of Investment

$121$ Accounts Receivable

$141$ Inventory

$151$ Supplies

$152$ Prepaid Insurance

LIABILITIES

$211$ Accounts Payable

$221$ Notes Payable

$224$ Interest Payable

$231$ Salaries Payable

EQUITY

$311$ Common Stock

$331$ Retained Earnings

$391$ Unrealized Holding Gain$/$Loss: Available$-$for$-$Sale Securities

REVENUE

$411$ Sales Revenue

$431$ Interest Income

$435$ Gain on Sale of Available$-$for$-$Sale Securities

EXPENSES

$500$ Cost of Goods Sold

$511$ Insurance Expense

$512$ Utilities Expense

$513$ Delivery Expense

$515$ Supplies Expense

$521$ Advertising Expense

$523$ Salaries Expense

$531$ Bad debt Expense

$539$ Miscellaneous Expenses

$540$ Interest Expense