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Concept Introduction:
Fair value of Securities:
When an investment is purchased, it is required to revalue the investment at the end of the year in order to make sure the fair value is correctly reflected in the financial statements.
Fair value refers to the realizable value of the securities at the end of a reporting period. It can be viewed as the replacement cost of the securities if such securities were purchased today.
If the cost of purchase is higher than the fair value of the investment at the time of revaluation, then the difference is debited to the fair value adjustments account.
If the cost of purchase is lower than the fair valueof the investment at the time of revaluation, then the difference is debited to the fair value adjustments account.
Journal entries are the first step in recording financial transactions and preparation of financial statements.
These represent the impact of the financial transaction and demonstrate the effect on the accounts impacted in the form of debits and credits.
Assets and expenses have debit balances and Liabilities and Incomes have credit balances and according to the business transaction, the accounts are appropriately debited will be credited by credited to reflect the effect of business transactions and events.
Requirement 1:
Journal entries to record the transactions including fair value adjustments
Concept Introduction:
Fair value of Securities:
When an investment is purchased, it is required to revalue the investment at the end of the year in order to make sure the fair value is correctly reflected in the financial statements.
Fair value refers to the realizable value of the securities at the end of a reporting period. It can be viewed as the replacement cost of the securities if such securities were purchased today.
If the cost of purchase is higher than the fair value of the investment at the time of revaluation, then the difference is debited to the fair value adjustments account.
If the cost of purchase is lower than the fair valueof the investment at the time of revaluation, then the difference is debited to the fair value adjustments account.
Requirement 2:
Table showing details of total cost of purchase, total fair value adjustments and total available value of securities at the end of each year.
Concept Introduction:
Fair value of Securities:
When an investment is purchased, it is required to revalue the investment at the end of the year in order to make sure the fair value is correctly reflected in the financial statements.
Fair value refers to the realizable value of the securities at the end of a reporting period. It can be viewed as the replacement cost of the securities if such securities were purchased today.
If the cost of purchase is higher than the fair value of the investment at the time of revaluation, then the difference is debited to the fair value adjustments account.
If the cost of purchase is lower than the fair valueof the investment at the time of revaluation, then the difference is debited to the fair value adjustments account.
Requirement 3:
Table showing details of total cost of purchase, Unrealized Gain / (Losses), Realized Gain / (Losses) and Total Value of Portfolio available for Sale
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Chapter 15 Solutions
FUND ACCOUNTING PRINCIPLES CONNECT
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