Question

Brooks Co. purchases various investments in trading securities at a cost of $63,000 on December 27, 2017. (This is its first and only purchase of such securities.) At December 31, 2017, these securities had a fair value of $82,000.

Prepare the December 31, 2013, year-end adjusting entry for the trading securities' portfolio.

Prepare the January 3, 2014, entry when Brooks sells a portion of its trading securities (that had originally cost $33,000) for $35,000.

Answer 1

Journal Entry

Step-by-step explanation:

1. Trading Securities Dr, $19,000

To unrealized gain on trading Securities $19,000

(Working note = $82,000 - $63,000)

( To record unrealized gain on security)

2. Cash Dr, $35,000

To Trading Securities $33,000

To gain on sale of trading Securities $2,000

(To record trading securities)