Part 3 (4 points) S&L; Financial buys and sells securities which it classifies a

Question

Part 3 (4 points) S&L; Financial buys and sells securities which it classifies as available-for-sale. On December 27,2018, S&L; purchased Coca-Cola common shares for $875,000 and sold the shares on January 3, 2019, for $880,000. At December 31, the shares had a fair value of $873,000, and S&L; has the intent and ability to hold the investment until fair value recovers. Prepare the journal entries (1) to record the purchase of the investment on December 27, 2018, and (2) to adjust the investment to fair value on December 31, 2018, and (3) to record the sell of the investment on Januray 3, 2019.

Explanation / Answer

journal entries 1) purchase of investment 27/12/18 available for sale securities 875000                   cash 875000 2) sale securities decrease in value 31/12/18 unrealised loss 2000 (875000-873000)                 available for sale securities 2000 3) Sales of available for sale securities 3/1/2019 cash 880000 unrealised loss 2000                  available for sale securities 875000                   realised gain on available for sale securities 7000

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