Fair Value Journal Entries, Trading Investments Gruden Bancorp Inc. purchased a

Question

Fair Value Journal Entries, Trading Investments Gruden Bancorp Inc. purchased a portfolio of trading securities during Year 1. The cost and fair value of this portfolio on December 31, Year 1, was as follows: Name Number of Shares Total Cost Total Fair Value Griffin Inc. 1,150 $15,410 $14,490 Luck Company 750 24,600 22,880 Wilson Company 350 10,500 10,710 Total $50,510 $48,080 On May 10, Year 2, Gruden Bancorp Inc. purchased 500 shares of Carroll Inc., at $30 per share plus a $140 brokerage commission. Provide the journal entries to record the following: a. The adjustment of the trading security portfolio to fair value on December 31, Year 1. Year 1 Dec. 31 Unrealized Gain (Loss) on Trading Investments Valuation Allowance for Trading Investments Feedback a. The gain or loss is the difference between the portfolio cost and its fair value. The offset account for the gain or loss entry is the valuation allowance account. b. The May 10, Year 2, purchase of Carroll Inc., stock. Year 2 May 10 Investments-Carroll Inc. Cash

Explanation / Answer

ecurities name No. of sharea Cost($) MArket Price/Fair VAlue ($) Griffin Inc. 1150 15410 14490 Luck Company 750 24600 22880 Wilson Company 350 10500 10710 TOTAL 50510 48080 Journal Entry Account Tittle Debit Credit Unrealised Loss on trading securities   2430 Trading Securities A/c (%50510-$48080) 2430 Answer 2 Portfolio would be carried at the fair values prevailing on December 31, 2014, So no entry is required.

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