Question

The investments of Charger Inc. include a single investment: 11,010 shares of Raiders Inc. common stock purchased on February 24, Year 1, for $39 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 had increased to $42 per share.

Required:

A.	Journalize the entries to acquire the investment on February 24, and record the adjustment to fair value on December 31, Year 1. Refer to the Chart of Accounts for exact wording of account titles.
B.	How is the unrealized gain or loss for trading investments reported on the financial statements?

Answer 1

Solution A:

Journal Entries - Charger Inc.
Date	Particulars	Debit	Credit
24-Feb	Equity investment Dr (11010*$39)	$429,390.00
	To Cash		$429,390.00
	(To record shares purchased of Raiders inc.)
31-Dec	Fair value adjustment Dr	$33,030.00
	To Unrealized holding gain or loss - NI		$33,030.00
	(To record unrealized gain on trading securities)

Solution B:

Unrealized gain or loss for trading investment reported on income statement under head of other revenues.