Assignment Detail

Assignment ID: FG132956762

Question: If Hurricane Inc. purchased a portfolio of available-for-sale securities in Year 1, its first year of operations. The cost and fair value of this portfolio on December 31, Year 1, was as follows:

Name Number of Shares Total Cost Total Fair Value
Tornado Inc. 1,150  $15,410  $17,110
 Tsunami Corp. 850  27,880  30,390 
Typhoon Corp. 200  5,800   5,510 
 Total   $49,090  $53,010
On June 12, Year 2, Hurricane purchased 550 shares of Rogue Wave Inc. at $29 per share plus a $50 brokerage commission.

a. Provide the journal entries to record the following:

-The adjustment of the available-for-sale security portfolio to fair value on December 31, Year 1.
-The June 12, Year 2, purchase of Rogue Wave Inc. stock.Year 1, Dec. 31

Year 2, June 12

b. How are unrealized gains and losses treated differently for available-for-sale securities than for trading securities?

Unrealized gains and losses for available-for-sale securities reported as a credit (positive) or debit (negative) balance in the section. As a result, the changes in fair value are not reflected on the, as is the case with trading securities.