Last Unguaranteed Financial Inc. purchased the following trading securities

Securities that management intends to actively trade for profit.

during 2016, its first year of operations:

Name	Number of Shares	Cost
Arden Enterprises Inc.	4,530	$135,900
French Broad Industries Inc.	2,600	62,400
Pisgah Construction Inc.	1,620	103,680
Total		$301,980

The market price per share for the trading security portfolio on December 31, 2016, was as follows:

	Market Price
	per Share,
	Dec. 31, 2016
Arden Enterprises Inc.	$35
French Broad Industries Inc.	27
Pisgah Construction Inc.	60

Required:

A.

Provide the journal entry to adjust the trading security portfolio to fair value on December 31, 2016.*

B.

Assume the market prices of the portfolio were the same on December 31, 2017, as they were on December 31, 2016. What would be the journal entry to adjust the portfolio to fair value?*

*Refer to the Chart of Accounts for exact wording of account titles. Be sure to enter the year as part of the date.

CHART OF ACCOUNTS

Last Unguaranteed Financial Inc.

General Ledger

	ASSETS
110	Cash
111	Petty Cash
120	Accounts Receivable
121	Allowance for Doubtful Accounts
131	Notes Receivable
132	Interest Receivable
141	Merchandise Inventory
145	Office Supplies
146	Store Supplies
151	Prepaid Insurance
161	Trading Investments
162	Available-for-Sale Investments
165	Valuation Allowance for Trading Investments
166	Valuation Allowance for Available-for-Sale Investments
181	Land
191	Store Equipment
192	Accumulated Depreciation-Store Equipment
193	Office Equipment
194	Accumulated Depreciation-Office Equipment

	LIABILITIES
210	Accounts Payable
221	Notes Payable
231	Interest Payable
241	Salaries Payable
251	Sales Tax Payable

EQUITY

311

Common Stock

312

Paid-In Capital in Excess of Par-Common Stock

321

Preferred Stock

322

Paid-In Capital in Excess of Par-Preferred Stock

331

Treasury Stock

332

Paid-In Capital from Sale of Treasury Stock

340

Retained Earnings

350

Unrealized Gain (Loss) on Available-for-Sale Investments

351

Cash Dividends

352

Stock Dividends

390

Income Summary

A. Provide the journal entry to adjust the trading security portfolio to fair value on December 31, 2016. Refer to the Chart of Accounts for exact wording of account titles. Be sure to enter the year as part of the date.

PAGE 10

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2

Solution

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2

Points:

B. Assume the market prices of the portfolio were the same on December 31, 2017, as they were on December 31, 2016. What would be the journal entry to adjust the portfolio to fair value? If no entry is required, type "no entry required" and leave the amount box blank. Refer to the Chart of Accounts for exact wording of account titles. Be sure to enter the year as part of the date.

PAGE 10

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2

Solution

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2

	REVENUE
410	Sales
611	Interest Revenue
612	Dividend Revenue
631	Gain on Sale of Investments
641	Unrealized Gain on Trading Investments

	EXPENSES
511	Cost of Merchandise Sold
512	Bad Debt Expense
515	Credit Card Expense
516	Cash Short and Over
520	Salaries Expense
531	Advertising Expense
532	Delivery Expense
533	Repairs Expense
534	Selling Expenses
535	Rent Expense
536	Insurance Expense
537	Office Supplies Expense
538	Store Supplies Expense
561	Depreciation Expense-Store Equipment
562	Depreciation Expense-Office Equipment
590	Miscellaneous Expense
710	Interest Expense
731	Loss on Sale of Investments
741	Unrealized Loss on Trading Investments