My real question for the question below is that why in journal entry we only record the unrealized loss once which is(425124-1246-421900=1978)? I thought I still need to record the unrealized loss for the time it is sold which is (421000 - 421900= -900), then do the reclassification entry then the final journal entry for sale?

I am confusing when I should do the reclassification entry. Suppose period one is the fair value on December and period two is the fair value sold on January on next year, do we only do the reclassification if period two has a realized gain?

Mills Corporation acquired as a long-term investment $400,000 of 7% bonds, dated July 1, on July 1, 2018. Mills determined that it should account for the bonds as an available-for-sale investment. The market interest rate (yield) was 6% for bonds of similar risk and maturity. Mills paid $425,124 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2018, was $421,900. Moodys bond rating agency upgraded the risk rating of the bonds, and Mills decided to sell the investment on January 2, 2019, for $421,000

prepare the Journal entries associated with an available for sale investment

1.

Investment	400,000
Premium	25,124
cash		425,124

2.

Cash	14000
premium		1246
interest income		12754

3.

Unrealized Loss	1977
investment		1977

4.

cash	421000
realized loss	2877
premium		23877
investment		398023
unrealized loss		1977