Awesome Accounting Students (AAS) Incorporated disclosed the following information in Footnote 9 of their most recent annual report December 31, 2020 $ in millions Adjusted Cost Gross Gross Fair Value Unrealized Unrealized Gains Losses Corporate debt $4.500 $15 $16 $4,499 investments Investment in 2010 24 1.986 Governmental Debt Financial 3,200 980 230 3.950 institution Instruments Total AFS $9,710 $995 $270 $10,435 Investments Fair Value S in millions Adjusted Cost December 31, 2019 Gross Gross Unrealized Unrealized Gains Losses $3 $10 $4.793 60 5.390 Corporate debt $4.800 investments Investment in 5.450 Governmental Debt Financial 4,650 institution Instruments Total AFS $14,900 Investments 1,026 125 5.551 $1,029 $195 $15.734 AAS indicates the following: 'During 2020 we sold available for sale investments... The gross realized gains on sales of available-for-sale investments were $970 million in 2021. AAS's Note 17 (Other Comprehensive income) indicates unrealized holding gains of $855 milion during 2020 and a reclassification adjustment of $970 for gains that had previously been included in OCI and recorded in the fair value adjustment but which were now being included in net income after being realized upon sale Required: 1. Prepare a T-account that shows the change between the December 31, 2019, and December 31, 2020, balances for the fair value adjustment associated with AAS'S AFS Investments. Also, indicate how much did the fair value adjustment change during 2020? 2. Prepare a journal entry that records any unrealized holding gains and losses that occurred during 2020. Ignore income taxes. 3. Prepare a journal entry that records any teclassification adjustment for available-for-sale investments sold during 2020. Ignore income taxes. 4. Using your journal entries from requirements 2 and 3, adjust your T-account from requirement 1. Have you accounted for the entire change in the fair value adjustment that occurred during 2020? If not what is one possible explanation? Awesome Accounting Students (AAS) Incorporated disclosed the following information in Footnote 9 of their most recent annual report December 31, 2020 $ in millions Adjusted Cost Gross Gross Fair Value Unrealized Unrealized Gains Losses Corporate debt $4.500 $15 $16 $4,499 investments Investment in 2010 24 1.986 Governmental Debt Financial 3,200 980 230 3.950 institution Instruments Total AFS $9,710 $995 $270 $10,435 Investments Fair Value S in millions Adjusted Cost December 31, 2019 Gross Gross Unrealized Unrealized Gains Losses $3 $10 $4.793 60 5.390 Corporate debt $4.800 investments Investment in 5.450 Governmental Debt Financial 4,650 institution Instruments Total AFS $14,900 Investments 1,026 125 5.551 $1,029 $195 $15.734 AAS indicates the following: 'During 2020 we sold available for sale investments... The gross realized gains on sales of available-for-sale investments were $970 million in 2021. AAS's Note 17 (Other Comprehensive income) indicates unrealized holding gains of $855 milion during 2020 and a reclassification adjustment of $970 for gains that had previously been included in OCI and recorded in the fair value adjustment but which were now being included in net income after being realized upon sale Required: 1. Prepare a T-account that shows the change between the December 31, 2019, and December 31, 2020, balances for the fair value adjustment associated with AAS'S AFS Investments. Also, indicate how much did the fair value adjustment change during 2020? 2. Prepare a journal entry that records any unrealized holding gains and losses that occurred during 2020. Ignore income taxes. 3. Prepare a journal entry that records any teclassification adjustment for available-for-sale investments sold during 2020. Ignore income taxes. 4. Using your journal entries from requirements 2 and 3, adjust your T-account from requirement 1. Have you accounted for the entire change in the fair value adjustment that occurred during 2020? If not what is one possible explanation
