unrealized holding gains and losses example 3

Investments in Debt and Equity Securities Unrealized Holding Gains and Losses Example 3 Company A invested in the following securities during 2006. Securities Type of Securities Cost Fair value at 12/31/2006 Fair value at 12/31/2007 AT Trading $87,000 $58,000 sold in 2007 BT Trading $65,000 $67,000 sold in 2007 AA Available-for-sale $120,000 $115,000 $117,000 BA Available-for-sale $350,000 $330,000 $340,000 AH Held-to-maturity $200,000 $201,000 $210,000 BH Held-to-maturity $150,000 $155,000 $156,000 Unrealized Holding Gains and Losses (A) (B) (C) = (B) - (A) Trading Securities Cost Fair value at 12/31/2006 Holding Gain (Loss) during 2006 AT Trading $87,000 $58,000 ($29,000) BT Trading $65,000 $67,000 $2,000 Total $152,000 $125,000 ($27,000) (A) (B) (C) = (B) - (A) (D) (E) = (D) - (A) Available-for- sale Cost Fair value at 12/31/2006 Holding Gain (Loss) during 2006 Fair value at 12/31/2007 Holding Gain (Loss) during 2007 AA Available-for-sale $120,000 $115,000 ($5,000) $117,000 $2,000 BA Available-for-sale $350,000 $330,000 ($20,000) $340,000 $10,000 Total $470,000 $445,000 ($25,000) $457,000 $12,000 Held-to-maturity securities are valued at amortized cost. Unrealized holding gains and losses are not recognized for held-to-maturity securities. Journal Entry for Trading Securities 12/31/2006 Debit Credit Unrealized loss on trading securities (*1) 27,000 Market adjustment - trading securities 27,000 (*1) reported on the income statement, included in earnings Journal Entries for Available-for-sale securities 12/31/2006 Debit Credit Unrealized increase (decrease) in value of availabe-for-sale securities (*2) 25,000 Market adjustment - available-for-sale securities 25,000 (*2) reported on the balance sheet, in the shareholders' equity section 12/31/2007 Debit Credit Market adjustment - available-for-sale securities 12,000 Unrealized increase (decrease) in value of availabe-for-sale securities 12,000 Copyright © 1999-2009 by AccountingStudy.com. TM Page 1 of 1

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Page 1: Unrealized Holding Gains and Losses Example 3

Investments in Debt and Equity SecuritiesUnrealized Holding Gains and LossesExample 3

Company A invested in the following securities during 2006.

Securities Type of Securities Cost Fair value at 12/31/2006

Fair value at 12/31/2007

AT Trading $87,000 $58,000 sold in 2007BT Trading $65,000 $67,000 sold in 2007AA Available-for-sale $120,000 $115,000 $117,000 BA Available-for-sale $350,000 $330,000 $340,000 AH Held-to-maturity $200,000 $201,000 $210,000 BH Held-to-maturity $150,000 $155,000 $156,000

Unrealized Holding Gains and Losses(A) (B) (C) = (B) - (A)

Trading Securities Cost Fair value at

12/31/2006

Holding Gain (Loss) during

2006AT Trading $87,000 $58,000 ($29,000)BT Trading $65,000 $67,000 $2,000

Total $152,000 $125,000 ($27,000)

(A) (B) (C) = (B) - (A) (D) (E) = (D) - (A)

Available-for-sale Cost Fair value at

12/31/2006

Holding Gain (Loss) during

2006

Fair value at 12/31/2007

Holding Gain (Loss) during

2007AA Available-for-sale $120,000 $115,000 ($5,000) $117,000 $2,000 BA Available-for-sale $350,000 $330,000 ($20,000) $340,000 $10,000

Total $470,000 $445,000 ($25,000) $457,000 $12,000

Held-to-maturity securities are valued at amortized cost.Unrealized holding gains and losses are not recognized for held-to-maturity securities.

Journal Entry for Trading Securities12/31/2006 Debit Credit

Unrealized loss on trading securities (*1) 27,000Market adjustment - trading securities 27,000(*1) reported on the income statement, included in earnings

Journal Entries for Available-for-sale securities12/31/2006 Debit Credit

Unrealized increase (decrease) in value of availabe-for-sale securities (*2) 25,000Market adjustment - available-for-sale securities 25,000(*2) reported on the balance sheet, in the shareholders' equity section

12/31/2007 Debit CreditMarket adjustment - available-for-sale securities 12,000

Unrealized increase (decrease) in value of availabe-for-sale securities 12,000

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