Question

the following information applies to the questions displayed below.
kitty company began operations in the current year and acquired short - term debt investments in trading securities. the year - end cost and fair values for its portfolio of these debt investments follow.

qs 15 - 4 (algo) fair value adjustment to a portfolio of trading securities lo p1

prepare the journal entry to record the december 31 year - end fair value adjustment for these debt securities.

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journal entry worksheet

1

record the year - end adjustment to fair value, if any.

note: enter debits before credits.

Explanation:

Step1: Calculate the total cost

$$\begin{align*} \text{Total Cost}&=16800 + 26400+6600\\ &=50,000 \end{align*}$$

Step2: Calculate the total fair value

$$\begin{align*} \text{Total Fair Value}&=12600+27720 + 5280\\ &=45,600 \end{align*}$$

Step3: Calculate the unrealized loss

$$\begin{align*} \text{Unrealized Loss}&=\text{Total Cost}-\text{Total Fair Value}\\ &=50000 - 45600\\ &=4,400 \end{align*}$$

Step4: Prepare the journal entry

The journal entry to record the fair - value adjustment for trading securities is:
Debit: Unrealized Loss - Income ($4400$)
Credit: Fair Value Adjustment - Trading ($4400$)

Answer:

Date	General Journal	Debit	Credit
	Fair Value Adjustment - Trading		$4400$