A. Securities Available for Sale; Current Asset
12.11
a. Securities available for sale; current asset.
b. Debt securities held to maturity; noncurrent asset.
c. Securities available for sale; current asset.
d. Securities available for sale; noncurrent asset.
e. Trading securities; current asset.
f. Securities available for sale; noncurrent asset (although a portion of these bonds might appear as a current asset).
12.15
10/15/2008
Marketable Securities (Security A) 28,000
Cash 28,000
Assets
/ = / Liabilities / + / Shareholders' Equity / (Class.)+28,000
–28,000
To record acquisition of shares of Security A.
11/02/2008
Marketable Securities (Security B) 49,000
Cash 49,000
Assets
/ = / Liabilities / + / Shareholders' Equity / (Class.)+49,000
–49,000
To record acquisition of shares of Security B.
12/31/2008
Cash 1,000
Dividend Revenue 1,000
Assets
/ = / Liabilities / + / Shareholders' Equity / (Class.)+1,000 / +1,000 / IncSt à RE
12/31/2008
Unrealized Holding Loss on Security A Available for
Sale (Other Comprehensive Income) 3,000
Marketable Securities (Security A) 3,000
Assets
/ = / Liabilities / + / Shareholders' Equity / (Class.)–3,000 / –3,000 / OCInc à
AOCInc
To record unrealized holding loss on Security A.
12/31/2008
Marketable Securities (Security B) 6,000
Unrealized Holding Gain on Security B Available
for Sale (Other Comprehensive Income) 6,000
Assets
/ = / Liabilities / + / Shareholders' Equity / (Class.)+6,000 / +6,000 / OCInc à
AOCInc
To record unrealized holding gain on Security B.
2/10/2009
Cash 24,000
Realized Loss on Sale of Securities Available for Sale
(= $24,000 – $28,000) 4,000
Marketable Securities (Security A) 25,000
Unrealized Holding Loss on Security A
Available for Sale (Other Comprehensive
Income) 3,000
Assets
/ = / Liabilities / + / Shareholders' Equity / (Class.)+24,000 / –4,000 / IncSt à RE
–25,000 / +3,000 / OCInc à
AOCInc
To record sale of Security A.
12/31/2009
Cash 1,200
Dividend Revenue 1,200
Assets
/ = / Liabilities / + / Shareholders' Equity / (Class.)+1,200 / +1,200 / IncSt à RE
To record dividend received from Security B.
12/31/2009
Unrealized Holding Gain on Security B Available for
Sale (Other Comprehensive Income) 2,000
Marketable Securities (Security B) (= $53,000
– $55,000) 2,000
Assets
/ = / Liabilities / + / Shareholders' Equity / (Class.)–2,000 / –2,000 / OCInc à
AOCInc
To revalue Security B to market value.
7/15/2010
Cash 57,000
Unrealized Holding Gain on Security B Available for
Sale (= $6,000 – $2,000) (Other Comprehensive
Income) 4,000
Marketable Securities (Security B) 53,000
Realized Gain on Sale of Securities Available for
Sale (= $57,000 – $49,000) 8,000
Assets
/ = / Liabilities / + / Shareholders' Equity / (Class.)+57,000 / +8,000 / IncSt à RE
–53,000 / –4,000 / OCInc à
AOCInc
To record sale of Security B.
12.20
a. Sale of marketable securities during 2008: Proceeds of $14,000; gain on sale is $4,000 = $14,000 – $10,000, so acquisition cost was $10,000.
b. Carrying value at time of sale was $13,000, so unrealized holding gain at time of sale was $3,000 = $13,000 – $10,000.
c. The ending balance of Net Unrealized holding Gains was $2,000 less at the end of 2008 than at the beginning, while the unrealized holding gain on the securities sold was $3,000. The sale reduced the balance by $3,000. Since the ending balance declined by only $2,000, the securities on hand must have increased during the year by $1,000, so the net decline is $2,000 = $3,000 – $1,000.
d. The Marketable Securities account increased by $8,000 = $195,000 – $187,000 during 2008. The sale reduced the account by $13,000 and the unrealized holding gain on the securities held at the end of the year increased the balance by $1,000; see Part c. above. A net increase of $9,000 after a reduction of $12,000 means the cost of new securities is $20,000 = $8,000 + $12,000.