Question

Brooks Co. purchases various investments in trading securities at a cost of $50,000 on December 27, 2017. (This is its first and only purchase of such securities.) At December 31, 2017, these securities had a fair value of $60,000.

1. & 3. Prepare the December 31, 2017, year-end adjusting entry for the trading securities' portfolio and the January 3, 2018, entry when Brooks sells a portion of its trading securities (that had originally cost $25,000) for $27,500. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Date	General Journal	Debit	Credit
27-Dec	Investment held fo sale A/c	50000
	To Cash A/c		50000
	(Being Investment purchased)
31-Dec	Investment held fo sale A/c (60000-50000)	10000
	To Unrealised Gain on Investment A/c		10000
03-Jan	Cash A/c	27500
	Unrealised Gain on Investment A/c (10000/50000*25000)	5000
	To Investment held fo sale A/c (25000/50000*60000)		30000
	To Gain on sale of investment A/c (27500+5000-30000)		2500