Microsoft’s 2020 10-K includes the following information relevant to its available-for-sale investments in Note 17—Accumulated Other Comprehensive Income (Loss):Year Ended June 30,202020192018Balance, beginning of period$1,488$(850)$1,825Unrealized gains (losses), net of tax of $1,057, $616, and $(427)3,9872,331(1,146)Reclassification adjustments for (gains) losses included in other income (expense), net493(2,309)Tax expense (benefit) included in provision for income taxes(1)(19)738Cumulative effect of accounting changes0(67)42Balance, end of period$5,478$1,488$(850)Answer the following questions by referring to the disclosure note above:Prepare a journal entry to record unrealized gains for 2020. (Hint: $3,987 is net of tax effects, so you will need to add back tax effects to show the amount of pretax unrealized gain.)Prepare a journal entry to record Microsoft’s reclassification adjustment for 2020 (pretax).

As per the accounting standards the available for sale securities are recorded each year at their…

Answered: Microsoft’s 2020 10-K includes the…

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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Microsoft’s 2020 10-K includes the following information relevant to its available-for-sale investments in Note 17—Accumulated Other Comprehensive Income (Loss):

Year Ended June 30,	2020	2019	2018
Balance, beginning of period	$1,488	$(850)	$1,825
Unrealized gains (losses), net of tax of $1,057, $616, and $(427)	3,987	2,331	(1,146)
Reclassification adjustments for (gains) losses included in other income (expense), net	4	93	(2,309)
Tax expense (benefit) included in provision for income taxes	(1)	(19)	738
Cumulative effect of accounting changes	0	(67)	42
Balance, end of period	$5,478	$1,488	$(850)

Answer the following questions by referring to the disclosure note above:

Prepare a journal entry to record unrealized gains for 2020. (Hint: $3,987 is net of tax effects, so you will need to add back tax effects to show the amount of pretax unrealized gain.)
Prepare a journal entry to record Microsoft’s reclassification adjustment for 2020 (pretax).

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