What is part B?

In 2019, a company purchases debt securities at a par value of $400,000. Their year-end value is $416,000. In 2020, these securities are sold for $420,000 and new securities are purchased for $560,000. At the end of 2020, the securities have not yet been sold, and have a value of $480,000.

Required

Prepare the journal entries to record the above information for 2019 and 2020, assuming that:

a. The securities are categorized as trading securities.

General JournalDateDescriptionDebitCredit2019Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

To record purchase of trading securities.Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

To record change in value for trading securities at year-end.2020CashAnswer

Answer

Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

Investment in trading securitiesAnswer

Answer

To record sale of trading securities.Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

To record purchase of new trading securities.Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

To record change in value for trading securities at year-end.

b.The securities are categorized as AFS securities, and (1) the company intends to sell the securities held at the end of 2020 before the loss is recovered, or (2) the company intends to hold the securities, and their decline in value is attributed to expected credit losses, or (3) the company intends to hold the securities, and their decline in value is attributed to a rise in market interest rates.

General JournalDateDescriptionDebitCreditb (1)2019Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

To record purchase of AFS securities.Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

To record change in value for AFS securities at year-end.2020CashAnswer

Answer

Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

Investment in AFS securitiesAnswer

Answer

Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

To record sale of AFS securities.Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

To record purchase of new AFS securities.Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (income)

Allowance for credit losses on AFS securities

Answer

Answer

Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

To record change in value for AFS securities at year-end.(2)2020CashAnswer

Answer

Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Impairment loss on AFS securities (income)

Answer

Answer

Investment in AFS securitiesAnswer

Answer

Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

To record sale of AFS securities.Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

To record purchase of new AFS securities.Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (income)

Allowance for credit losses on AFS securities

Answer

Answer

Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Allowance for credit losses on AFS securities

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Losses on AFS securities (income)

Answer

Answer

To record impairment loss for AFS securities at year-end.(3)2020CashAnswer

Answer

Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

Investment in AFS securitiesAnswer

Answer

Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

To record sale of AFS securities.Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

To record purchase of AFS securities.Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

Answer

Investment in trading securities

Cash

Gains on trading securities (income)

Losses on trading securities (income)

Investment in AFS securities

Gains on AFS securities (OCI)

Reclassification of gains on AFS securities (OCI)

Gains on AFS securities (income)

Losses on AFS securities (OCI)

Allowance for credit losses on AFS securities

Answer

Answer

To record change in value for AFS securities at year-end.

Please answer all parts of the question.