Available-for-sale securities; adjustment to fair value During its first year of operations, Giovani Foods purchased available-for-sale securities for $37,500. Giovani Foods expects it will sell the securities within the next year. At the end of the year, these securities had a market value of $33,900. Assume that Giovani Foods did not purchase or sell any available-for-sale securities during its second year of operations. At the end of the second year, the market value of the available-for-sale securities is $40,000. a. What would be the amount of the adjustment to fair value for the available-for-sale securities? 6,100 ✔ b. After the adjustment is posted to the accounts, what is the balance of the valuation allowance for available-for- sale securities account? 40,000 X debit c. How would the increase in the fair value of the securities in the second year be reported on Giovani Foods' financial statements? The available-for-sale securities would be reported as a current asset on the balance sheet. The unrealized gain on available-for-sale securities would be reported as an addition to stockholders' equity on the balance sheet.

Available-for-sale securities; adjustment to fair value During its first year of operations, Giovani Foods purchased available-for-sale securities for $37,500. Giovani Foods expects it will sell the securities within the next year. At the end of the year, these securities had a market value of $33,900. Assume that Giovani Foods did not purchase or sell any available-for-sale securities during its second year of operations. At the end of the second year, the market value of the available-for-sale securities is $40,000. a. What would be the amount of the adjustment to fair value for the available-for-sale securities? 6,100 ✔ b. After the adjustment is posted to the accounts, what is the balance of the valuation allowance for available-for- sale securities account? 40,000 X debit c. How would the increase in the fair value of the securities in the second year be reported on Giovani Foods' financial statements? The available-for-sale securities would be reported as a current asset on the balance sheet. The unrealized gain on available-for-sale securities would be reported as an addition to stockholders' equity on the balance sheet.

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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