Kitty Company began operations in the current year and acquired short-term debt investments in trading securities. The year-end cost and fair values for its portfolio of these debt investments follow.

Portfolio of Trading
Securities Cost Fair Value
Tesla Bonds $15,300 $ 11,475
Nike Bonds 24,400 25,620
Ford Bonds 6,100 4,880

Prepare journal entries to record the December 31 year-end fair value adjustment for the above debt securities.

Explanation:

business model of the securities is to earn capital gain and are classified as through fair vlaue through profit and loss

such securities are revalued at reporting date any gain are loss is recognized in profit and loss account.

Security name               Carrying Amount      Fair value         (Gain)/Loss

Telsa Bond                          15300                        11475                 3900                

Nike Bonds                          24400                       25620               -1220

Ford Bonds                          6100                           4880                  1220

the securities will recorded at fair value in the balance sheet and their respective gain loss will be recorded in profit and loss by making these entries

Entries

Loss on revaluation of investment           3900

                     Investment in Telsa bond             3900

To record the loss on telsa investment.

Nike Investment     1220

       Gain on revaluation of investment   1220  

To record the Gain on Nike investment.

Loss on revaluation of investment           1220

                     Investment in Ford bond             1220

To record the loss on Ford investment.

u = 30

continuing your method

= +

subtract from both sides

= - thus

= -

= ⇒ u = 30

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