Instructions

a$.$ Illustrate the presentation of marketable securities and the unrealized holding gain or loss in Charter's financial statements at

December $31,$ year $1.$ Include a caption indicating the section of the financial statements in which each of these accounts appears.

b$.$ Prepare journal entries to record the transactions on April $10$ and August $7.$

c$.$ Prior to making a fair value adjustment at the end of year $2,$ determine the unadjusted balance in the Marketable Securities control

account and the Unrealized Holding Gain $($or Loss$)$ on Investments account.

d$.$ Prepare a schedule showing the cost and the market values of securities owned at the end of year $2.$

e$.$ Prepare the fair value adjusting entry required at December $31,$ year $2.$

f$.$ Illustrate the presentation of the marketable securities andjunrealized holding gain $($or loss$)$ in the financial statements at December $31,$

year $2.$

g$.$ Illustrate the presentation of the net realized gains $($or losses$)$ in the year $2$ income statement. Assume a multiple$-$step income

statement and show the caption identifying the section in which this amount would appear.

h$.$ Explain how both the realized and unrealized gains and losses will affect the company's year $2$ income tax return.

PROBLEM $7\mathrm{.}6$A Notes Receivable $$ LO$7-7$