Brooks Co. purchases various investments in trading securities at a cost of $50,

Question

Brooks Co. purchases various investments in trading securities at a cost of $50,000 on December 27, 2017. (This is its first and only purchase of such securities.) At December 31, 2017, these securities had a fair value of $60,000.

1. & 3. Prepare the December 31, 2017, year-end adjusting entry for the trading securities' portfolio and the January 3, 2018, entry when Brooks sells a portion of its trading securities (that had originally cost $25,000) for $27,500. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Explanation / Answer

Date General Journal Debit Credit 27-Dec Investment held fo sale A/c 50000 To Cash A/c 50000 (Being Investment purchased) 31-Dec Investment held fo sale A/c (60000-50000) 10000 To Unrealised Gain on Investment A/c 10000 03-Jan Cash A/c 27500 Unrealised Gain on Investment A/c (10000/50000*25000) 5000 To Investment held fo sale A/c (25000/50000*60000) 30000 To Gain on sale of investment A/c (27500+5000-30000) 2500

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