Question

At December 31, 2018, Atlanta Company has an equity portfolio valued at $160,000. Its cost was $132,000. If the Securities Fair Value Adjustment has a debit balance of $8,000, which of the following journal entries is required at December 31, 2018?

Select one:
a. Fair Value Adjustment 28,000 Unrealized Holding Gain or Loss-Income 28,000
b. Unrealized Holding Gain or Loss-Income 20,000 Fair Value Adjustment 20,000
c. Unrealized Holding Gain or Loss-Income 28,000 Fair Value Adjustment 28,000
d. Fair Value Adjustment 20,000 Unrealized Holding Gain or Loss-Income 20,000

Answer 1

Answer:

a. Fair Value Adjustment 28,000 Unrealized Holding Gain or Loss-Income 28,000

Explanation:

The journal entry is as follows

On December 31, 2018

Fair Value Adjustment A/c Dr

          To Unrealized Holding Gain or Loss-Income A/c

(Being the unrealized holding gain or loss is recorded)

The computation is shown below:

= Valued of an equity portfolio - cost -  debit balance of securities fair value

= $160,000 - $132,000 - $8,000

= $20,000