Asked by Abylay Tastanbekov on May 16, 2024
Verified
The following information is available for Lewis Corporation's available-for-sale securities at December 31 2017. Security ‾ Cost ‾ Fair value ‾X $34,000$30,000Y24,000‾32,000‾$58,000‾$62,000‾\begin{array}{lll} \underline{\text { Security } }& \underline{\text { Cost } }& \underline{\text { Fair value }}\\\text {X }& \$ 34,000 & \$ 30,000 \\\text {Y} & \underline{24,000} & \underline{32,000}\\&\underline{\$58,000}&\underline{\$62,000}\end{array} Security X Y Cost $34,00024,000$58,000 Fair value $30,00032,000$62,000 Instructions
Prepare the adjusting entry to record the securities at fair value at December 31 2017.
Available-For-Sale Securities
These are debt or equity securities purchased with the intent of selling before they reach maturity, but are not actively traded, and are recorded at fair market value on the balance sheet.
Fair Value
Fair value is the estimated market price of an asset or liability, reflecting the amount for which it could be exchanged or settled in a transaction between knowledgeable, willing parties under no compulsion.
Adjusting Entry
A journal entry made at the end of an accounting period to allocate revenue and expenses to the appropriate period, ensuring accurate financial reporting.
- Formulate and recalibrate financial entries to document investments at fair value, in line with Generally Accepted Accounting Principles.
- Develop an understanding of the processes involved in accounting for unrealized gains and losses in available-for-sale securities.
Verified Answer
Unrealized Gain or Loss-Equity \quad \quad \quad \quad \quad \quad \quad \quad 4,000
Learning Objectives
- Formulate and recalibrate financial entries to document investments at fair value, in line with Generally Accepted Accounting Principles.
- Develop an understanding of the processes involved in accounting for unrealized gains and losses in available-for-sale securities.
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