Chapter 12, Problem 12.1BYP

a)

To determine

Investment: The act of allocating money to buy a monetary asset, in order to generate wealth in the future is referred to as investment.

Fair value: Fair value is the price at which, both seller and buyer agree to exchange the asset. So, fair value is the selling price to the seller and the purchase price for the buyer.

Journal: Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

• Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
• Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

T-account:

T-account is the form of the ledger account, where the journal entries are posted to this account. It is referred to as the T-account, because the alignment of the components of the account resembles the capital letter ‘T’.

The components of the T-account are as follows:

1. a) The title of the account
2. b) The left or debit side
3. c) The right or credit side

To Prepare: The T-Account that shows the change between the December 29, 2012 and December 28, 2013 balances of the fair value adjustments.

b)

To determine

To Journalize: The unrealized gain that occurred during 2013.

c)

To determine

To Prepare: The T-Account that shows  values to be substituted for the change between the December 29, 2012 and December 28, 2013 balances of the fair value adjustments.