Question

On January 12, 2021. Jefferson Corporation purchased bonds of Rose Corporation for $75 million at par and classified the securities as available for sale. On December 31 2021, these bonds were valued at $68 million Nine months later, on October 3, 2022, Jefferson Corporation sold these bonds for 586 million

As part of the multistep approach to record the 2022 transaction Jefferson Corporation should next take the second step of

a. Reversing total accumulated unrealized holding gains of $25 milion
b. Reversing total accumulated unrealized holding gains of $18 milion
c. Reversing total accumulated unrealized holding gains of S7 million
d. Reversing total accumulated unrealized holding gains of $11 milion

Answer 1

Answer:

d. Reversing total accumulated unrealized holding gains of $11 milion

Explanation:

First, the company will do a gain for the different between the 68 millon at the end of 2021 and the 86 million sale price.

86,000,000 - 68,000,000 = 18,000,000

The second step is to reverse the accumulated gain:

18,000,000 from 2021

and 7,000,000 loss from 2020 (off-set by the 2021 gain)

total accumulated 11,000,000