Question

on december 31, reggit company held the following short - term investments in its portfolio of available - for - sale debt securities. reggit had no short - term investments in its prior accounting periods.
available - for - sale
securities cost fair value
verrizano corporation bonds $ 61,000 $ 59,780
preble corporation notes 42,000 37,380
lucerne company bonds 57,000 54,720
qs 15 - 9 (algo) adjusting available - for - sale debt securities to fair value lo p3
prepare the december 31 adjusting entry to report these investments at fair value.
complete this question by entering your answers in the tabs below.
fair value
adjustment general
journal
computation of fair value adjustment.
fair value adjustment computation - available for sale portfolio
investment cost fair value unrealized amount
verrizano corporation bonds $ 61,000 $ 59,780
preble corporation notes 42,000 37,380
lucerne company bonds 57,000 54,720
total $ 160,000 $ 151,880 unrealized loss

Explanation:

Step1: Calculate unrealized loss for each security

For Verrizano Corporation bonds: $61000 - 59780=\$1220$
For Preble Corporation notes: $42000 - 37380=\$4620$
For Lucerne Company bonds: $57000 - 54720=\$2280$

Step2: Calculate total unrealized loss

Total unrealized loss $=1220 + 4620+2280=\$8120$

Step3: Prepare the adjusting journal entry

Debit Unrealized Loss - Equity (or Other - Comprehensive Income) $\$8120$
Credit Fair Value Adjustment (Available - for - Sale) $\$8120$

Answer:

Debit: Unrealized Loss - Equity (or Other - Comprehensive Income) $8120$; Credit: Fair Value Adjustment (Available - for - Sale) $8120$