Question

On January 1, 2018, Hoosier Company purchased $944,000 of 10% bonds at face value. The bond market value was $987,000 on December 31, 2018.

Required:
Prepare the appropriate journal entry on December 31, 2018, to properly value the bonds assuming the bonds are classified as: (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1. Trading securities.
2. Securities available for sale.
3. Held-to-maturity securities.

Record the unrealized holding gain or loss for trading securities.

Record the unrealized holding gain or loss for securities available for sale.

Record the unrealized holding gain or loss for Held-to-maturity securities.

Answer 1

Solution:

Journal entries

Transaction No	Accounts	Debit($)	Credit($)
1	Fair value adjustment, bonds a/c Dr (987000-944000)	43,000
	To Net unrealized holding gain/loss a/c		43,000
	(Being record the unrealized holding gain or loss for trading securities)
2	Fair value adjustment, bonds a/c Dr	43,000
	To Net unrealized holding gain/loss a/c		43,000
	(Being record the unrealized holding gain or loss for securities available for sale)
3	Changes in future value of held maturity securities are ignored