During the month, Blue, Inc. purchased 1,050 shares for $7.00 per share and classified them as trading investments. At the end of the month, the price of the securities was $11.25 per share. What adjusting entry, if any, will Blue, Inc. record when it closes its books at the end of the month to reflect this change in value?ᐧ aDr. Valuation Allowance for Trading Investments$11,812.50 Cr. Unrealized Gain on Trading Investments $11,812.50bDr. Unrealized Loss on Trading Investment$4,462.50 Cr. Valuation Allowance for Trading Investments $4,462.50cDr. Valuation Allowance for Trading Investments$4,462.50 Cr. Unrealized Gain on Trading Investments $4,462.50Because the trading investments were not sold during the month, no adjusting entry is required.dDr. Valuation Allowance for Trading Investments$4,462.50 Cr. Realized Gain on Trading Investments $4,462.50

Trading securities seem to be securities that encompass both equity and debt securities and so an organization planned to sell in the short future for a profit generated by rises within the price of the securities.The correct option is "C" Answer explanation: First of all, we have to calculate unrealized gain per share as follow: Unrealized gain per share = Price of the stock at the end of the month - Purchase value of each share Unrealized gain per share = $11.25 - $7.00 = $4.25 per share Now, we can calculate the total unrealized gain as follow: Total unrealized gain = 1,050 × $4.25 = $4,462.5 And, the Journal entry for this gain can be passed as follow: Account Title Dr ($) Cr ($) Valuation allowance for Trading Investment 4,462.50 To Unrealized gain on trading investment 4,462.50

Answered: During the month, Blue, Inc. purchased…

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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During the month, Blue, Inc. purchased 1,050 shares for $7.00 per share and classified them as trading investments. At the end of the month, the price of the securities was $11.25 per share. What adjusting entry, if any, will Blue, Inc. record when it closes its books at the end of the month to reflect this change in value?ᐧ

Dr. Valuation Allowance for Trading Investments	$11,812.50
Cr. Unrealized Gain on Trading Investments		$11,812.50

Dr. Unrealized Loss on Trading Investment	$4,462.50
Cr. Valuation Allowance for Trading Investments		$4,462.50

Dr. Valuation Allowance for Trading Investments	$4,462.50
Cr. Unrealized Gain on Trading Investments		$4,462.50

Because the trading investments were not sold during the month, no adjusting entry is required.

Dr. Valuation Allowance for Trading Investments	$4,462.50
Cr. Realized Gain on Trading Investments		$4,462.50

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