Instructions The investments of Charger Inc. include a single investment: 12,940
ID: 2431947 • Letter: I
Question
Instructions The investments of Charger Inc. include a single investment: 12,940 shares of Raiders Inc. common stock purchased on February 24, Year 1, for $38 per share including brokerage commission. These shares were classified as trading securities. As of the December 31, Year 1, balance sheet date, the share price had increased to $44 per share. Required A. Journalize the entries to acquire the investment on February 24, and record the adjustment to fair value on December 31, Year 1. Refer to the Chart of Accounts for exact wording of account titles. B. How is the unrealized gain or loss for trading investments reported on the financial statements?Explanation / Answer
Journal enrtries
The Unrealized gain or loss for trading investments is disclosed in Comprehensive income.
In determining net income, unrealized losses and gains would be included in determining net income.
Date Account Titles Debit Credit Feb 24, Year1 Investments -Raiders inc. Stock $491,720 Cash a/c (12,940 shars x $38) $491,720 [Being securities in Raiders Inc. acquired for trading] Dec 31, Year 2 Investments -Raiders inc. Stock [12,940 x ($44 - $38)] $77,640 Unrealized gain (Loss) on Trading Investment a.c $77,640 [Being Unrealized gain recognized]