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…

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Business

Accounting

Adjusting to Fair Value - journal entries

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

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 | | |

Definition Definition Method of recording financial transactions in the book of original entry by debiting and crediting the accounts affected by a transaction using the golden rules of accrual accounting.

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