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17 September, 05:37

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.

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  1. 17 September, 07:10
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    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.
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