Investment in Trading and AFS Securities

In 2016, a company purchases securities at a cost of $900,000. Their year-end value is $950,000. In 2017, these securities are sold for $920,000 and new securities are purchased for $1,220,000. At the end of 2017, the securities have not yet been sold, and have a value of $1,160,000.

Required Prepare the journal entries to record the above information for 2016 and 2017, assuming that:

a. The securities are categorized as trading securities.

General Journal
Date	Description	Debit	Credit
2016	AnswerInvestment in trading securitiesLosses on AFS securities (OCI)Gains on AFS securities (income)Impairment loss on AFS securities (income)Reclassification of gains on AFS securities (OCI)CashLosses on trading securities (income)Gains on trading securities (income)Gains on AFS securities (OCI)Investment in AFS securities	Answer	Answer
	AnswerGains on trading securities (income)Losses on AFS securities (OCI)Impairment loss on AFS securities (income)CashInvestment in AFS securitiesReclassification of gains on AFS securities (OCI)Investment in trading securitiesLosses on trading securities (income)Gains on AFS securities (OCI)Gains on AFS securities (income)	Answer	Answer
	To record purchase of trading securities.
	AnswerGains on AFS securities (OCI)Gains on trading securities (income)Losses on trading securities (income)Losses on AFS securities (OCI)Impairment loss on AFS securities (income)CashInvestment in AFS securitiesInvestment in trading securitiesReclassification of gains on AFS securities (OCI)Gains on AFS securities (income)	Answer	Answer
	AnswerLosses on AFS securities (OCI)CashInvestment in AFS securitiesGains on AFS securities (OCI)Losses on trading securities (income)Reclassification of gains on AFS securities (OCI)Impairment loss on AFS securities (income)Gains on AFS securities (income)Investment in trading securitiesGains on trading securities (income)	Answer	Answer
	To record change in value for trading securities at year-end.
2017	Cash	Answer	Answer
	AnswerLosses on AFS securities (OCI)Reclassification of gains on AFS securities (OCI)Gains on trading securities (income)Investment in AFS securitiesCashImpairment loss on AFS securities (income)Investment in trading securitiesGains on AFS securities (OCI)Gains on AFS securities (income)Losses on trading securities (income)	Answer	Answer
	AnswerInvestment in trading securitiesReclassification of gains on AFS securities (OCI)Investment in AFS securitiesLosses on AFS securities (OCI)Losses on trading securities (income)Gains on AFS securities (OCI)Impairment loss on AFS securities (income)Gains on AFS securities (income)CashGains on trading securities (income)	Answer	Answer
	To record sale of trading securities.
	AnswerGains on trading securities (income)Investment in AFS securitiesInvestment in trading securitiesLosses on trading securities (income)Gains on AFS securities (income)Reclassification of gains on AFS securities (OCI)Losses on AFS securities (OCI)CashImpairment loss on AFS securities (income)Gains on AFS securities (OCI)	Answer	Answer
	AnswerGains on AFS securities (OCI)Losses on AFS securities (OCI)Investment in trading securitiesLosses on trading securities (income)Gains on trading securities (income)Reclassification of gains on AFS securities (OCI)CashImpairment loss on AFS securities (income)Gains on AFS securities (income)Investment in AFS securities	Answer	Answer
	To record purchase of new trading securities.
	AnswerLosses on trading securities (income)CashInvestment in trading securitiesImpairment loss on AFS securities (income)Gains on AFS securities (income)Losses on AFS securities (OCI)Investment in AFS securitiesReclassification of gains on AFS securities (OCI)Gains on AFS securities (OCI)Gains on trading securities (income)	Answer	Answer
	AnswerGains on AFS securities (OCI)Gains on AFS securities (income)Impairment loss on AFS securities (income)Reclassification of gains on AFS securities (OCI)Losses on AFS securities (OCI)Investment in trading securitiesGains on trading securities (income)CashInvestment in AFS securitiesLosses on trading securities (income)	Answer	Answer
	To record change in value for trading securities at year-end.

b. The securities are categorized as AFS securities, and the securities on hand at the end of 2017 are considered (1) not impaired, or (2) impaired.

General Journal
	Date	Description	Debit	Credit
	2016	AnswerGains on trading securities (income)CashInvestment in AFS securitiesGains on AFS securities (OCI)Impairment loss on AFS securities (income)Investment in trading securitiesLosses on trading securities (income)Gains on AFS securities (income)Reclassification of gains on AFS securities (OCI)Losses on AFS securities (OCI)	Answer	Answer
		AnswerImpairment loss on AFS securities (income)Gains on AFS securities (income)Investment in trading securitiesLosses on AFS securities (OCI)Investment in AFS securitiesLosses on trading securities (income)Gains on AFS securities (OCI)CashGains on trading securities (income)Reclassification of gains on AFS securities (OCI)	Answer	Answer
		To record purchase of AFS securities.
		AnswerImpairment loss on AFS securities (income)Investment in trading securitiesLosses on trading securities (income)Gains on AFS securities (OCI)Gains on trading securities (income)Reclassification of gains on AFS securities (OCI)CashGains on AFS securities (income)Losses on AFS securities (OCI)Investment in AFS securities	Answer	Answer
		AnswerLosses on AFS securities (OCI)Investment in AFS securitiesCashGains on AFS securities (income)Gains on AFS securities (OCI)Reclassification of gains on AFS securities (OCI)Investment in trading securitiesLosses on trading securities (income)Impairment loss on AFS securities (income)Gains on trading securities (income)	Answer	Answer
		To record change in value for AFS securities at year-end.
b (1)	2017	Cash	Answer	Answer
		AnswerCashLosses on AFS securities (OCI)Investment in trading securitiesInvestment in AFS securitiesImpairment loss on AFS securities (income)Gains on trading securities (income)Gains on AFS securities (OCI)Losses on trading securities (income)Reclassification of gains on AFS securities (OCI)Gains on AFS securities (income)	Answer	Answer
		Investment in AFS securities	Answer	Answer
		AnswerInvestment in trading securitiesInvestment in AFS securitiesImpairment loss on AFS securities (income)Gains on AFS securities (income)Gains on trading securities (income)CashLosses on trading securities (income)Gains on AFS securities (OCI)Reclassification of gains on AFS securities (OCI)Losses on AFS securities (OCI)	Answer	Answer
		To record sale of AFS securities.
		AnswerImpairment loss on AFS securities (income)CashGains on AFS securities (OCI)Reclassification of gains on AFS securities (OCI)Losses on trading securities (income)Investment in trading securitiesGains on trading securities (income)Investment in AFS securitiesGains on AFS securities (income)Losses on AFS securities (OCI)	Answer	Answer
		AnswerInvestment in trading securitiesLosses on trading securities (income)Gains on trading securities (income)Impairment loss on AFS securities (income)Losses on AFS securities (OCI)Gains on AFS securities (OCI)Reclassification of gains on AFS securities (OCI)Investment in AFS securitiesCashGains on AFS securities (income)	Answer	Answer
		To record purchase of new AFS securities.
		AnswerGains on AFS securities (income)Impairment loss on AFS securities (income)Investment in AFS securitiesInvestment in trading securitiesLosses on AFS securities (OCI)Gains on trading securities (income)Losses on trading securities (income)Reclassification of gains on AFS securities (OCI)Gains on AFS securities (OCI)Cash	Answer	Answer
		AnswerGains on trading securities (income)Losses on AFS securities (OCI)Gains on AFS securities (OCI)Reclassification of gains on AFS securities (OCI)Investment in trading securitiesImpairment loss on AFS securities (income)Investment in AFS securitiesCashLosses on trading securities (income)Gains on AFS securities (income)	Answer	Answer
		To record change in value for AFS securities at year-end.
b (2)	2017	Cash	Answer	Answer
		AnswerGains on AFS securities (income)Investment in trading securitiesInvestment in AFS securitiesCashLosses on AFS securities (OCI)Reclassification of gains on AFS securities (OCI)Gains on AFS securities (OCI)Losses on trading securities (income)Gains on trading securities (income)Impairment loss on AFS securities (income)	Answer	Answer
		Investment in AFS securities	Answer	Answer
		AnswerGains on AFS securities (income)Investment in AFS securitiesGains on AFS securities (OCI)Investment in trading securitiesLosses on trading securities (income)Impairment loss on AFS securities (income)Losses on AFS securities (OCI)CashGains on trading securities (income)Reclassification of gains on AFS securities (OCI)	Answer	Answer
		To record sale of AFS securities.
		AnswerInvestment in trading securitiesInvestment in AFS securitiesImpairment loss on AFS securities (income)Gains on trading securities (income)Reclassification of gains on AFS securities (OCI)Gains on AFS securities (OCI)Losses on trading securities (income)Losses on AFS securities (OCI)CashGains on AFS securities (income)	Answer	Answer
		AnswerInvestment in trading securitiesGains on AFS securities (OCI)Losses on trading securities (income)CashImpairment loss on AFS securities (income)Investment in AFS securitiesLosses on AFS securities (OCI)Gains on trading securities (income)Reclassification of gains on AFS securities (OCI)Gains on AFS securities (income)	Answer	Answer
		To record purchase of new AFS securities.
		AnswerCashInvestment in trading securitiesInvestment in AFS securitiesGains on AFS securities (OCI)Losses on AFS securities (OCI)Reclassification of gains on AFS securities (OCI)Gains on trading securities (income)Losses on trading securities (income)Gains on AFS securities (income)Impairment loss on AFS securities (income)	Answer	Answer
		AnswerGains on AFS securities (OCI)Gains on trading securities (income)Gains on AFS securities (income)Reclassification of gains on AFS securities (OCI)CashInvestment in AFS securitiesImpairment loss on AFS securities (income)Investment in trading securitiesLosses on AFS securities (OCI)Losses on trading securities (income)	Answer	Answer
		To record impairment loss for AFS securities at year-end.