《会计学原理教学资料》Chapter_15.pptVIP

On December 20, Music City sells 500 shares of Intex, in the open market for $45,000. The cost per share of Music City’s Intex stock is $86. The company sold 500 shares, so the cost of the shares sold is equal to $43,000 ($86 times 500 shares). The journal entry to record the sale is to debit Cash for $45,000, the proceeds from the sale, credit Long-Term Investment – AFS (Intex) for $43,000, the cost basis of the shares sold, and credit Gain on Sale of Long-Term Investment for the difference of $2,000. We have a gain because the proceeds from the sale exceed the cost of the shares sold. * Trading securities are debt and equity securities that the company intends to actively manage and trade for profit. Frequent purchases and sales are expected. The entire portfolio of trading securities is reported at its market value; this requires a “market adjustment” from the cost of the portfolio of securities. Any unrealized gain or loss from a change in the market value of the portfolio of trading securities is reported in the income statement. * Part I TechCom’s portfolio of trading securities had a total cost of $11,500, and a market value of $13,000, on December 31, 2008, the first year the securities were held. The $1,500 difference between cost of $11,500 and market value of $13,000 is an unrealized gain. The adjusting journal entry on December 31st is to debit Market Adjustment – Trading for $1,500, and credit Unrealized Gain – Trading for the same amount. Let’s look at how these two new accounts appear on the financial statements. Part II The Market Adjustment – Trading account has a debit balance and is an adjunct assets account that will increase the Short-Term Investment – Trading account on the balance sheet. The Unrealized Gain – Trading will appear on the income statement, usually listed under other income and expense towards the bottom of the statement. * Assume TechCom sells trading securities that had cost $1,000 for $1,200 cash, on January 9, 2009. The pro