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	1/1/2018 Fair Value
A	$20,000	$25,000
B	30,000	29,000
Totals	$50,000	$54,000

During 2018, the following transactions occurred:

May 3	Purchased C debt securities at their par value for $50,000.
July 1	Sold all of the A securities for $25,000 plus interest of $1,000.
Dec. 31	Received interest of $7,600 on the B and C securities. Additionally the following information was available:

Security	12/31/18 Fair Value
B	$29,000
C	52,500

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?

General journal

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

FASB requires unrealized gains and losses for available-for-sale securities to be reported as a component of other comprehensive income because:

I	Reporting unrealized gains and losses in income for available-for-sale securities would create unnecessary volatility in a company's reported net income.
II	The securities are actively managed making the inclusion of gains and losses irrelevant.