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 Security Cost 1/1/18 Fair Value A $45,000 $56,000 B $68,000 $65,000 Totals $113,000 $121,000

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 $56,000 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 $75,000 C $53,000

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?