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Question: at the beginning of 2018 ace company had the following...

Question details

At the beginning of 2018, Ace Company had the following portfolio of investments in available-for-sale debt securities (all of which were acquired at par value):

Security

Cost

1/1/2018 Fair Value

A $20,000 $25,000
B 30,000 29,000
Totals $50,000 $54,000

During 2018, the following transactions occurred:

May 3 Purchased C debt securities at their par value for $50,000.
July 1 Sold all of the A securities for $25,000 plus interest of $1,000.
Dec. 31 Received interest of $7,600 on the B and C securities. Additionally the following information was available:

Security

12/31/18 Fair Value

B $29,000
C 52,500

Required:

1. Prepare journal entries to record the preceding information.
2. What is the balance in the Unrealized Holding Gain/Loss account on December 31, 2018?
3. Next Level What justification does the FASB give for its treatment of unrealized holding gains and losses for available-for-sale securities?

Chart of Accounts

CHART OF ACCOUNTS
Ace Company
General Ledger
ASSETS
111 Cash
114 Investment in Available-for-Sale Securities
119 Allowance for Change in Fair Value of Investment
121 Accounts Receivable
141 Inventory
152 Prepaid Insurance
181 Equipment
189 Accumulated Depreciation
LIABILITIES
211 Accounts Payable
231 Salaries Payable
250 Unearned Revenue
261 Income Taxes Payable
EQUITY
311 Common Stock
331 Retained Earnings
339 Unrealized Holding Gain/Loss: Available-for-Sale Securities
REVENUE
411 Sales Revenue
431 Interest Income
432 Dividend Income
434 Gain on Sale of Available-for-Sale Securities
EXPENSES
500 Cost of Goods Sold
511 Insurance Expense
512 Utilities Expense
521 Salaries Expense
532 Bad Debt Expense
540 Interest Expense
541 Depreciation Expense
559 Miscellaneous Expenses
910 Income Tax Expense

General Journal

Shaded cells have feedback.

Prepare journal entries to record the 2018 transactions. Additional Instructions

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PAGE 1

GENERAL JOURNAL

Score: 108/150

DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT

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What is the balance in the Unrealized Holding Gain/Loss account on December 31, 2018?

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