Question

Assume that an investment in bonds classified as trading securities is sold. Which of the following would be included in the two entries to record the sale? (Select all that apply.)

a. An update of the Fair value adjustment account
b. An update of the Fair value adjustment account
c. Removal of the related investment account balances
d. Removal of the related investment account balances
e. The total amount of gain or loss that has occurred since the securities were purchased
f. The total amount of gain or loss that has occurred since the securities were purchased
g. The amount of the unrealized holding gain or loss that has occurred since the end of the prior accounting period
h. The amount of the unrealized holding gain or loss that has occurred since the end of the prior accounting period

Answer 1

An update of the fair value adjustment account,

Removal of the related investment account balances

The total amount of gain or loss that has occurred since the securities were purchased

Step-by-step explanation:

The activities that occurred between the purchase and during the sales of bonds classified as trading securities will determine the entries to be recorded.

First, since it was an investment, it means, it had an entry already in the books. Its sales therefore, will mean the books needs to be updated and this will be done through the Fair value adjustment account.

Secondly in updating the fair value, there is the need to remove the related investment account balance. This is because the investment has been sold so it should not be reflected any more.

Thirdly, since the investment was bought at a point, carried for a while and then eventually sold, some gain or loss would have been generated between its acquisition and its sales, therefore the entry for total amount of gain or loss that occurred since the purchase should be made.

Part 4

The items such as the