Chapter C, Problem 7DQ

To determine

Long-Term Investments:

Long-term investments are the part company's long-term assets that are reflected in the company's balance sheet as assets of the company. The long -term investments are subject to maturity only after minimum period of one year .These investments include bonds, investments in real estate, acquiring goodwill or copyrights.

Available-for-Sale Debt Securities:

The available-for-sale debt securities are an instrument of debt of easily identifiable fair values and are recorded in the balance sheet of the company. The unrealized gain or loss through such investments is accounted within the equity part of the balance sheet its value appears after or sometimes before the retained earnings of the company. Also, the fluctuations in the trading securities as unrealized gains or losses are recorded in income statement whereas the fluctuations in available-for-sale securities which generate unrealized gains or losses are recorded in a separate account called unrealized gain/loss account under other comprehensive income head.

Journal Entries:

It is a basic book of records in which transactions are recorded at a primary level in a chronological order so as to account for the transactions being entered into by the business over an accounting period.

Accounting rules regarding journal entries:

• Balance increases when: assets, losses and expenses are debited and liabilities, gains and incomes get credited.
• Balance decreases when: assets, losses and expenses get credited and liabilities, gains and incomes are debited.

To prepare: Journal entry.