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Chapter 13: Q9Q (page 658)

If the bonds in Question 8 are classified as available-for-sale, and they have a fair value at December 31, 2017, of $3,604,000, prepare the journal entry (if any) at December 31, 2017, to record this transaction.

Short Answer

Expert verified

Fair value adjustment debited and unrealised holding gain or loss income credited by $104,000. An unrealised gain is $104,000

Step by step solution

01

Definition of journal entry

Journal entry is the book of accounting in which company record all the transaction related to the money or monetary value.

02

Fair value adjustment entry

Date	Particulars	Debit	Credit
December 31, 2017	Fair Value Adjustment	$104,000
	UnrealisedHolding Gain or Loss- Income		$104,000
	(Being entry for the fair value adjustment)

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Most popular questions from this chapter

(a) Assuming no Fair Value Adjustment account balance at the beginning of the year, prepare the adjusting entry at the end of the year if Laura Company’s available-for-sale debt securities have a fair value of \(60,000 below cost.

(b) Assume the same information as part (a), except that Laura Company has a debit balance in its Fair Value Adjustment account of \)10,000 at the beginning of the year. Prepare the adjusting entry at year-end.

Indicate how unrealised holding gains and losses should be reported for investments classified as trading and held-for-collection.

Question: E13-1 (L01) (Balance Sheet Classification of Various Liabilities) How would each of the following items be reported on the balance sheet? (a) Accrued vacation pay. (j) Premium offers outstanding. (b) Estimated taxes payable. (k) Discount on notes payable. (c) Service warranties on appliance sales. (l) Personal injury claim pending. (d) Bank overdraft. (m) Current maturities of long-term debts to be paid (e) Employee payroll deductions unremitted. from current assets. (f) Unpaid bonus to officers. (n) Cash dividends declared but unpaid. (g) Deposit received from customer to guarantee (o) Dividends in arrears on preferred stock. performance of a contract. (p) Loans from officers. (h) Sales taxes payable. (i) Gift certificates sold to customers but not yet redeemed.

Define a provision, and give three examples of a provision.

CA13-7 ETHICS (Warranties) The Dotson Company, owner of Bleacher Mall, charges Rich Clothing Store a rental fee of \(600 per month plus 5% of yearly profits over \)500,000. Matt Rich, the owner of the store, directs his accountant, Ron Hamilton, to increase the estimate of bad debt expense and warranty costs in order to keep profits at $475,000.

Instructions

Answer the following questions.

(a) Should Hamilton follow his boss’s directive?

(b) Who is harmed if the estimates are increased?

(c) Is Matt Rich’s directive ethical?

See all solutions

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