For several years Fister Links Products has held shares of Microsoft common stock, considered by the company to be securities available-for-sale. The shares were acquired at a cost of $640,000. Their fair value last year was $778,000 and is $845,000 this year.
At what amount will the investment be reported in this year's balance sheet?
What adjusting entry is required to accomplish this objective?
Accounting for Available-for-sale securities:
An available-for-sale (AFS) security is a type of financial asset, a debt or equity security purchased with the intention of selling before maturity or holding it for a long period should it not have a maturity date. Available-for-sale securities are recorded at the fair value on the balance sheet. Any increase or a decrease in the fair market value of the investment is reflected in other comprehensive income (OCI) - part of the equity section of the balance sheet - as an unrealized gain or loss.
Answer and Explanation:
The shares of Microsoft common stock will be recorded at cost of $640,000, The entry would be,
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from Accounting 202: Intermediate Accounting IIChapter 2 / Lesson 5