Question

Fair Value Journal Entries, Available-for-Sale Investments

The investments of Steelers Inc. include a single investment: 14,600 shares of Bengals Inc. common stock purchased on September 12, Year 1, for $11 per share including brokerage commission. These shares were classified as available-for-sale securities. As of the December 31, Year 1, balance sheet date, the share price declined to $8 per share.

a. Journalize the entries to acquire the investment on September 12 and record the adjustment to fair value on December 31, Year 1.

Year 1 Sept. 12
Year 1 Dec. 31

b. How is the unrealized gain or loss for available-for-sale investments disclosed on the financial statements?

Unrealized Gain (Loss) on Available-for-Sale Investments is reported in the   of the  .

Answer 1

Part A :

Date	Account Titles & Explanation	Debit	Credit
Sep,12	Investment in common stock(14600 Shares in Bengals Inc. @ $ 11 per share)	160600
	Cash		160600
	(For Acquisition of Common shares)
Dec,31	Unrealised Loss (from Fair value adjustment(3*14600))	43800
	Invstment in Common stock		43800
	(For adjustments in fair value)

Part B :

Any resulting gain or loss is recorded to an unrealized gain and loss account that is reported as a separate line item in the stockholders' equity section of the balance sheet.

The gains and losses for available‐for‐sale securities are not reported on the income statement until the securities are sold.