At 12/31/17, Lowe Corporation had the following marketable equity securities tha

Question

At 12/31/17, Lowe Corporation had the following marketable equity securities that were purchased during 2017, its first year of operations

Fair                Unrealized

  Cost                Value            Gain/Loss

                 Adams Co.                                      $100,000         $ 60,000         $(40,000)

                 Bentley Co.                                         15,000             20,000              5,000

                 Chatter Co.                                         70,000             80,000           10,000

                        Totals                                       $185,000         $160,000         $(25,000)

Which of the following will be included in Lowe’s adjusting entry(ies) at 12/31/17?

Credit to Equity Securities of $25,000.

Debit to Unrealized Holding Loss—Income of $25,000

Credit to Unrealized Holding Gain—Income of $15,000

Debit to Securities FV Adjustment—Equity of $25,000.

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Explanation / Answer

Solution:

Total unrealized holding loss = $25,000

Therefore Lowe's adjusting entry at 31-Dec-2017 will include "Debit to Unrealized holding loss - Income of $25000 and credit to FV Adjustment"

Hence 2nd option is correct.

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