1400 b during 2011 cash 9500 loss on sale of

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1,400 (b) During 2011 Cash ............................................................................ 9,500 Loss on Sale of Securities ........................................ 500 Trading Securities .............................................. 10,000 EXERCISE 17-7 (Continued) (c) December 31, 2011 Securities Cost Fair Value Unrealized Gain (Loss) Stargate Corp. stock $20,000 $19,300 ( $ (700) Vectorman Co. stock 20,000 20,500 ( 500 ) Total of portfolio $40,000 $39,800 ( (200) Previous securities fair value adjustment balance—Cr. ( (1,400 ) Securities fair value adjustment—Dr. ( $1,200 ) Securities Fair Value Adjustment (Trading) ................ 1,200 Unrealized Holding Gain or Loss—
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Income ................................................................ 1,200 EXERCISE 17-8 (5–10 minutes) The unrealized gains and losses resulting from changes in the fair value of available-for-sale securities are recorded in an unrealized holding gain or loss account that is reported as other comprehensive income and as a separate component of stockholders’ equity until realized. Therefore, the following adjusting entry should be made at the year-end: Unrealized Holding Gain or Loss—Equity ............................ 6,000 Securities Fair Value Adjustment (Available-for-Sale) ...................................................... 6,000 Unrealized Holding Gain or Loss—Equity is reported as other comprehensive income and as a separate component in stockholders’ equity and not included in net income. The Securities Fair Value Adjustment (Available-for-Sale) account is a valuation account to the related investment account. EXERCISE 17-9 (10–15 minutes) (a) The portfolio should be reported at the fair value of $54,500. Since the cost of the portfolio is $53,000, the unrealized holding gain is $1,500, of which $200 is already recognized.
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