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In its first year of operations, Oriole Corporation purchased, as a long-term investment, available-for-sale debt securities...

In its first year of operations, Oriole Corporation purchased, as a long-term investment, available-for-sale debt securities costing $67,500. At December 31, 2020, the fair value of the securities is $62,750. Prepare the adjusting entry to record the securities at fair value. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit Dec. 31 Entry field with incorrect answer now contains modified data Entry field with incorrect answer now contains modified data Entry field with correct answer Entry field with incorrect answer now contains modified data

Date

Account Titles and Explanation

Debit

Credit

Dec. 31

Business   Accounting   
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Answer #1

When the company intends to sell the investments within one year i.e. they are held for trading, they are generally classified through income. At each reporting period, the value of investment is marked to the market and any difference is classified as profit/loss on financial asset.

The company purchased the investment at $67,500 and at the end of year the fair value of investments were $62,750. So the company have to record unrealized loss on fair valuation of $4,750 ($67,500 - $62,750) which will be done as follows:

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