Chapter C, Problem 9E

To determine

Available-for-sale security:

An available-for-sale security can be defined as a debt or equity that has been bought with the intention to sell it before its maturity or hold it until a long period of it does not have a maturity date. Such securities are recorded at fair value and any changes in the value between financial periods are considered in comprehensive income till the time they are sold.

Procedure for debiting and crediting an account:

• Increase in assets account, increase in expenses account, and decrease in liabilities account should be debited.

• Decrease in assets account, increase in revenue account, and increase in liabilities account should be credited.

All transactions affect the accounting equation that is displayed below. The accounting equation should always remain in balance at the time of recording a business transaction:

$\boxed{\text{Asset = Liabilities + Stockholders' equity}}$

Investment:

Investment can be defined as an asset or item obtained with the objective to generate income or appreciation. It can also be referred to as the purchase of goods that are to be used on a future date to create wealth.

Adjusting entries:

Adjusting entries can be defined as the accounting journal entries used to convert the accounting reports of a firm to the accrual basis.

To prepare: The adjusting entry to report the short-term investments at fair value.