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S&L Financial buys and sells securities which it classifies as available-for-sale. On December 27, 2018, S&L...

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Accounting

S&L Financial buys and sells securities which it classifiesas available-for-sale. On December 27, 2018, S&L purchasedCoca-Cola bonds at par for $875,000 and sold the bonds on January3, 2019, for $880,000. At December 31, the bonds had a fair valueof $873,000, and S&L has the intent and ability to hold theinvestment until fair value recovers.

Prepare journal entries to record (a) any unrealized gains orlosses occurring in 2018 and (b) the sale of the bonds in 2019,including recognition of any unrealized gains in 2019 prior to saleand reclassification of amounts out of OCI.

  • Record the entry to adjust to fair value on the date ofsale.

Note: Enter debits before credits.

DateGeneral JournalDebitCredit
January 03, 2019
  • Record the entry to reverse the previous fair valueadjustment.

Note: Enter debits before credits.

DateGeneral JournalDebitCredit
January 03, 2019
  • Record the entry for sale of investment in Coca Colabonds.

Note: Enter debits before credits.

DateGeneral JournalDebitCredit
January 03, 2019

Answer & Explanation Solved by verified expert
4.4 Ratings (870 Votes)
In the Books of SL Financials Purchases of Coca Cola Bonds on 27 Dec 2018 875000 Sold the Bonds on 3 Jan 2019 873000 At December 31 the bonds had a fair value of 873000 Journal Entries Date General Journal Debit Credit 27 Dec 2018 Available for Sale Coca Cola Bonds 875000 Cash Bank 875000 Purchases of Coca Cola Bonds a Any unrealized gains or losses occurring in 2018 Date General Journal Debit Credit 31 Dec 2018 Unrealized GainLoss 2000 Available for Sale Coca Cola Bonds 2000 Bonds Valued    See Answer
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