Hurricane Inc. purchased a portfolio of available-for-sale securities in Year 1, its first year of operations. The cost and fair value of this portfolio on December 31, Year 1, was as follows: Name Number of Shares Total Cost Total Fair Value Tornado Inc. 1,250 $16,750 $18,590 Tsunami Corp. 750 24,600 26,810 Typhoon Corp. 200 5,800 5,510 Total $47,150 $50,910 On June 12, Year 2, Hurricane purchased 500 shares of Rogue Wave Inc. at $29 per share plus a $120 brokerage commission. a. Provide the journal entries to record the following: The adjustment of the available-for-sale security portfolio to fair value on December 31, Year 1. The June 12, Year 2, purchase of Rogue Wave Inc. stock. b. How are unrealized gains and losses treated differently for available-for-sale securities than for trading securities? Unrealized gains and losses for available-for-sale securities reported as a credit (positive) or debit (negative) balance in the ______ section. As a result, the changes in fair value are not reflected on the ______ , as is the case with trading securities.
Hurricane Inc. purchased a portfolio of available-for-sale securities in Year 1, its first year of operations. The cost and fair value of this portfolio on December 31, Year 1, was as follows:
Name | Number of Shares | Total Cost | Total Fair Value | ||||
Tornado Inc. | 1,250 | $16,750 | $18,590 | ||||
Tsunami Corp. | 750 | 24,600 | 26,810 | ||||
Typhoon Corp. | 200 | 5,800 | 5,510 | ||||
Total | $47,150 | $50,910 |
On June 12, Year 2, Hurricane purchased 500 shares of Rogue Wave Inc. at $29 per share plus a $120 brokerage commission.
a. Provide the
- The adjustment of the available-for-sale security portfolio to fair value on December 31, Year 1.
- The June 12, Year 2, purchase of Rogue Wave Inc. stock.
b. How are unrealized gains and losses treated differently for available-for-sale securities than for trading securities?
Unrealized gains and losses for available-for-sale securities reported as a credit (positive) or debit (negative) balance in the ______ section. As a result, the changes in fair value are not reflected on the ______ , as is the case with trading securities.
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