For several years Fister Links Products has held Microsoft bonds, considered by
ID: 2404947 • Letter: F
Question
For several years Fister Links Products has held Microsoft bonds, considered by the company to be securities available-for-sale. The bonds were acquired at a cost of $530,000. At the end of 2018, their fair value was $646,000 and their amortized cost was $540,000. At the end of 2019, their fair value was $637,500 and their amortized cost was $550,000. At what amount will the investment be reported in the December 31, 2019, balance sheet? What adjusting entry is required to accomplish this objective (ignore interest)?
Explanation / Answer
Security Amortized Cost Fair Value Fair Value Adjustment Microsoft Bonds - 2019 637,500.00 550,000.00 87,500.00 Existing Balance in FVA ($646,000 - $540,000) 106,000.00 Fair Value Adjustment Needed (18,500.00) Journal Entry Date Particulars Dr. Amt. Cr. Amt. 31-Dec-19 Net Unrealized Holding Gains & Losses - OCI 18,500.00 Fair Value Adjustment 18,500.00 (To record the fair value adjustment) Amount of Investment Shown in Balance Sheet - 2019 637,500.00