[Chantel]

NINJA Question –

Marketable equity costing $75,000, adjusted to $30,000 in 2001, had a $60,000 fair value on December 31, 2002. Company transferred this security from available for sale to trading security on December 31, 2002. The decision qas made after properly accounting for investments at fair value.

What is the net effect if the above transfers on company’s earnings for the period ending December 31, 2002?

Answer is $15,000 decrease

–The existing unrealized loss for 2001 of $45,000 is reduced to $15,000 (to wrote fair value up from $30,000 to $60,000) and this remaining $15,000 is then removed from shareholders’ equity section of the balance sheet and is recognized in earnings.

Can someone give me the journal entries for this? Here’s what I got to change the fair value but I need that last journal entry

December 2001 entry

Unrealized gain/ loss 45,000

Valuation allowance 45,000

December 2002 entries

Valuation allowance 30,000

Unrealized gain/loss 30,000

F - F ('12), 90 (Dec '15)
A - F ('12), 73 (Feb '16), ? (July '16)
R - 87 (May '16)
B -