Final answer:
The journal entry on November 8 for the sale of one-third of Southwood bonds by Ekklesia Enterprises requires more information to determine the correct Fair Value Adjustment, as it depends on any prior changes in fair value.
Step-by-step explanation:
The given scenario involves the sale of a portion of trading securities. On January 8, Ekklesia Enterprises purchased Southwood bonds for $65,700. On November 8, they sold one-third of these bonds for $25,200. To record this transaction on November 8, we need to determine if there is a gain or loss on the sale by comparing the selling price with the carrying value of the one-third portion sold. The cost for one-third of the bonds is $65,700 / 3 = $21,900. Since the sale amount of $25,200 is higher than the cost of $21,900, there is a gain.
However, as the question mentions a Fair Value Adjustment, it suggests a revaluation of that fraction of the portfolio to its fair value. An adjustment would only be made if a previously recognized change in fair value had occurred. If the fair value of the bonds decreased to warrant an adjustment, we would debit Fair Value Adjustment if the fair value increased. However, without additional information on the fair value adjustment prior to the sale, no accurate journal entry can be determined regarding the Fair Value Adjustment account. The scenario provided does not offer sufficient information to confirm which journal entry is correct.