At the beginning of 2019, Ace Company had the following portfolio of investments in available-for-sale debt securities (all of which were acquired at par value): Security Cost 1/1/19 Fair Value A $50,000 $63,000 B 75,000 71,000 Totals $125,000 $134,000         During 2019, the following transactions occurred: Transactions: May 3 Purchased C debt securities at their par value for $50,000. July 1 Sold all of the A securities for $63,000 plus interest of $1,000. Dec. 31 Received interest of $900 on the B and C securities. Additionally the following information was available:   Security 12/31/19 Fair Value B $82,000 C 53,000       Required: 1. Prepare journal entries to record the preceding information. 2. What is the balance in the Unrealized Holding Gain/Loss account on December 31, 2019? 3. Next Level What justification does the FASB give for its treatment of unrealized holding gains and losses for available-for-sale securities?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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At the beginning of 2019, Ace Company had the following portfolio of investments in available-for-sale debt securities (all of which were acquired at par value):
Security
Cost
1/1/19 Fair Value
A $50,000 $63,000
B 75,000 71,000
Totals $125,000 $134,000
     
 
During 2019, the following transactions occurred:
Transactions:
May 3 Purchased C debt securities at their par value for $50,000.
July 1 Sold all of the A securities for $63,000 plus interest of $1,000.
Dec. 31 Received interest of $900 on the B and C securities. Additionally the following information was available:
 
Security
12/31/19 Fair Value
B $82,000
C 53,000
   
 
Required:
1. Prepare journal entries to record the preceding information.
2. What is the balance in the Unrealized Holding Gain/Loss account on December 31, 2019?
3. Next Level What justification does the FASB give for its treatment of unrealized holding gains and losses for available-for-sale securities?
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