Adjusting to Fair Value - journal entries **Adjusting AFS Debt Securities to Fair Value**A portfolio of investments of available-for-sale securities held by Dow Inc. is as follows.**Dec. 31, 2020**| Cost | Fair Value ||--------------|-------------|| Eastern Corp. bonds | $216,000 | $230,400 || Western Corp. bonds | $360,000 | $369,000 || **Total** | **$576,000** | **$599,400** |**Dec. 31, 2021**| Cost | Fair Value ||--------------|-------------|| Eastern Corp. bonds | $216,000 | $252,000 || Western Corp. bonds | $360,000 | $342,000 || **Total** | **$576,000** | **$594,000** |The Fair Value Adjustment account had a $0 balance on January 1, 2020. No sales or purchases took place in the available-for-sale investment portfolio in 2020 and 2021.**a.** Record the adjusting entry on December 31, 2020, to adjust the debt investments to fair value.| Date | Account Name | Dr. | Cr. ||---------------|----------------------------|-----|-----|| Dec. 31, 2020 | Fair Value Adjustment - AFS | | |**b.** Record the adjusting entry on December 31, 2021, to adjust the debt investments to fair value.| Date | Account Name | Dr. | Cr. ||---------------|----------------------------|-----|-----|| Dec. 31, 2021 | Fair Value Adjustment - AFS | | |

Date Account Name Dr. Cr. Dec 31,2020 Eastern Corp. Bonds 14,400 Western Corp. Bonds 9,000 Fair Value Adjustment 23,400 Calculation of total Increase Eastern Corp. Bonds = 230400-216000 = 14400 Western Corp, Bonds = 369000-360000 = 9000 Total Increase in financial asset is 23,400. You might have any other account name instead of financial asset. Please select correct asset name from drop down menu. In Debit, we will have our asset since our asset value in increasing.Date Account Name Dr. Cr. Dec 31,2020 Eastern Corp. Bonds 21,600 Fair Value Adjustment 5,400 Western Corp. Bonds 27,000 Calculation of total Increase/Decrease Eastern Corp. Bonds = 252000-230400 = 21,600 Western Corp, Bonds = 342000-369000 =(27000) Total decrease in financial asset is 5400. In this case eastern corp. has increased by 21600 but western corp has decreased by 27000 so in net our financial asset has been decreased by 5400. So we will pass the above adjustment entry. Thanks, if you have any query related to answer, please feel free to ask.