Question

The following information is available for Sandhill Company at December 31, 2017, regarding its investments.
Securities Cost Fair Value
2,500 shares of Myers Corporation Common Stock $36,200 $45,300
900 shares of Cole Incorporated Preferred Stock 24,300 20,800
$60,500 $66,100
Prepare the adjusting entry (if any) for 2017, assuming no balance in the Fair Value Adjustment account at January 1, 2017. Neither of Sandhill’s investments result in significant influence. Assume the securities as trading securities.

Answer 1

Answer:

Fair value adjustment Dr - $5,600

Unrealized holding gain Cr - $5,600

Explanation:

Date   Description                                                   Debit       Credit

          Fair value adjustment - available for sale   $5,600  

          Unrealized holding gain or loss-income                     $5,600

Working

Fair value adjustment - available for sale = $66,100 - $60,500 = $5,600