Question
At the beginning of 2019, Ace Company had the following portfolio of investments in available-for-sale debt securities (all of which were acquired at par value):
At the beginning of 2019, Ace Company had the following portfolio of investments in available-for-sale debt securities (all of which were acquired at par value):
| Security | Cost | 1/1/19 Fair Value |
| A | $15,000 | $19,000 |
| B | 23,000 | 22,000 |
| Totals | $38,000 | $41,000 |
During 2019, the following transactions occurred:
| Transactions: | ||
| 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 | 12/31/19 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, 2019? |
| 3. | Next Level What justification does the FASB give for its treatment of unrealized holding gains and losses for available-for-sale securities? |
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
9781285586618
