Question

On November 15, 2020, Evergreen Inc. purchases a trading investment for $150,000. Evergreen also enters into...

On November 15, 2020, Evergreen Inc. purchases a trading investment for $150,000.

Evergreen also enters into a put option to sell the shares for $150,000. At December 31, 2020,

the investment is valued at $155,000.

Required

a. Record any adjusting entries required at December 31, 2020 in connection with the

above transactions.

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Answer #1
Solution:
Adjusting entry at the year end is posted as below,
Journal Entries
Date Account Title and explanation Debit Credit
Dec 31.2020 Trading Investment $                     5,000
          Unrealized Gain on Trading Securities $                       5,000
(To record the unrealized gain on trading securities)
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