4TI
Question
On August 20, 2018, Mraz, Co. decides to invest excess cash of \(2,500 by purchasing Virginia, Inc. bonds. At year-end, December 31, 2018, the market price of the bonds was \)2,000. The investment is categorized as available-for-sale debt. Journalize the adjusting entry needed at December 31, 2018.
Step-by-Step Solution
Verified Answer
Adjusting entry will include the decline in the value of the available for sale debt investment of $500.
1Definition of Adjusting Entry
The journal entry was made at year-end with the main aim of updating the account balances is known as adjusting entry. Adjusted trial balance is prepared after such entries are prepared.
2Adjusting Journal Entry
Date | Accounts and Explanation | Debit $ | Credit $ |
31 Dec 2018 | Unrealized holding loss – available for sale | $500 |
|
| Fair value adjustment – available for sale |
| $500 |
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