Question

Fair Value Journal Entries, Trading Investments

The investments of Charger Inc. include a single investment: 24,000 shares of Raiders, Inc. common stock purchased on February 24, Year 1, for $25 per share including brokerage commission. These shares were classified as trading securities. As of the December 31, Year 1, balance sheet date, the share price increased to $33 per share.

a. Journalize the entries to acquire the investment on February 24, and record the adjustment to fair value on December 31, Year 1.

Year 1 Feb. 24
Year 1 Dec. 31

b. How is the unrealized gain or loss for trading investments reported on the financial statements?

The unrealized gain or unrealized loss for trading investments is disclosed in the   as  .

Answer 1

1. Investment (FVTPL). Dr $ 600,000

To bank a/c. 24000*25  

(To purchase of investment recognised as FVTPL )

2. Investment ( FVTPL). Dr. $ 192,000

To other comprehensive income 8*24000

( To revaluing investment at fair value)

Reporting for this would be investment shall be reported as financial asset in current assets at $ 792,000.

While unrealised gain which will be finally transferred to statement of profit and loss,shall be shown as gain on investment section, of statement of changes in equity,which will be reported as other equity in shareholders equity section of balance sheet.

Commission expense of $ 1 per share shall be transferred to statement of profit and loss immediately.

This solution is based on IFRS.

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