At the beginning of 2018, Ace Company had the following portfolio of investments in available-for-sale...
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Accounting
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
1/1/18 Fair Value
A
$25,000
$31,000
B
38,000
36,000
Totals
$63,000
$67,000
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 $31,000 plus interest of $1,000.
Dec. 31
Received interest of $1,000 on the B and C securities. Additionally the following information was available:
Security
12/31/18 Fair Value
B
$42,000
C
53,000
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?
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