For several years Fister Links Products has held Microsoft bonds, considered by
ID: 2575369 • 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 $600,000. At the end of 2018, their fair value was $730,000 and their amortized cost was $610,000. At the end of 2019, their fair value was $725,000 and their amortized cost was $620,000.
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
Ans: Securities Available for Sale are reported at Fair Value and resulting holding gain and losses are reported under Other Comprehensive Income statement of Profit & Loss Statement.
Amount will the investment be reported in the December 31, 2019, balance sheet = $ 725000
Journal Entry:
Other Comprehensive Income $ 5000
Fair Value Adjustment $5000
(being adjustment entry is being passed)