Carpark Services began operations in 20X1 and maintains long-term investments in
ID: 2438322 • Letter: C
Question
Carpark Services began operations in 20X1 and maintains long-term investments in available-for-sales ecurities. The year-end cost and fair values for its portfolio of these investments follow. The year-end adjusting entry to record the unrealized gain/loss at December 31, 20X2 is: Available-for-sale Securities December 31, 20xi December 31, 20x2 December 31, 2ex3 Cost Fair Value $285,000 $269,908 $368,000 $387,500 $438,800 $485,000 02:0101 Mutiple Choice Debit Fair Value Adjustment- Avalable-for-Sale (LT) $19,500 Credit Unrealized Gain-Equity. $19.500 Debit Unrealized Gain-Equty $19,500, Credt Fair Value Adjustment-Avallable-for-Sale LT) $19.500 Debit Fatr Value Adjustment- Avallable-for-Sale (LT) $35,500 Credit Unrealized Loss-Equity $16.000, Credt Unrealized Gain-Equity, $19,500. Dobit Fair Value Adjustment- Avaliliable-for-Sale L.T) $19.500, Credit Unrealized Loss- Equity $19,500. Debit Fair Value Adjustment-Avalable-for-Sale LT) $35.500, Credit Unrealized Galn- Equity $16,000Explanation / Answer
Since Fair Value is more, there is an Unrealized Gain on the securities.
Amount of unrealized gain = 387500 – 368000 = $ 19500
Available for Sale Securities 20x1
$ 285,000.00
Fair Value on 31 Dec 20x1
$ 269,000.00
Fair Value adjustment balance at the end of Dec 31, 20x1
$ 16,000.00
Credit
Available for Sale Securities 20x2
$ 368,000.00
Fair Value on 31 Dec 20x2
$ 387,500.00
Fair Value adjustment balance should be
$ 19,500.00
Debit
Unadjusted FV adjustment balance
$ 16,000.00
Credit
Amount by which FV adjustment should be debited
$ 35,500.00
[16000 for removing Credit balance and 19500 for making balance equal to Fair value of securities
Date
Accounts title
Debit
Credit
31 Dec 20x2
Fair Value Adjustment - Available for Sale (LT)
$ 35,500.00
Unrealised Loss - Equity
$ 16,000.00 [that was debited in 20x1, now credited]
Unrealised Gain - Equity
$ 19,500.00
Available for Sale Securities 20x1
$ 285,000.00
Fair Value on 31 Dec 20x1
$ 269,000.00
Fair Value adjustment balance at the end of Dec 31, 20x1
$ 16,000.00
Credit
Available for Sale Securities 20x2
$ 368,000.00
Fair Value on 31 Dec 20x2
$ 387,500.00
Fair Value adjustment balance should be
$ 19,500.00
Debit
Unadjusted FV adjustment balance
$ 16,000.00
Credit
Amount by which FV adjustment should be debited
$ 35,500.00
[16000 for removing Credit balance and 19500 for making balance equal to Fair value of securities