2011 2012 2013
Gains (losses) from sale of trading securities $ 15,000 $(20,000) $ 14,000
Unrealized holding losses on valuation
of trading securities (25,000) — (20,000)
Unrealized holding gain on valuation
of trading securities — 10,000 —
At January 1, 2014, Perez owned the following trading securities:
BKD Common (15,000 shares) $450,000
LRF Preferred (2,000 shares) 210,000
Drake Convertible bonds (100 bonds) 115,000
During 2014, the following events occurred:
1. Sold 5,000 shares of BKD for $170,000.
2. Acquired 1,000 shares of Horton Common for $40 per share. Brokerage commissions totaled $1,000.
At 12/31/14, the fair values for Perez's trading securities were:
BKD Common, $28 per share
LRF Preferred, $110 per share
Drake Bonds, $1,020 per bond
Horton Common, $45 per share
(a) Prepare a schedule which shows the balance in the Fair Value Adjustment (trading) account at December 31, 2013 (after the adjusting entry for 2013 is made).
(b) Prepare a schedule which shows the aggregate cost and fair values for Perez's trading securities portfolio at 12/31/14.
(c) Prepare the necessary adjusting entry based upon your analysis in (b) above.
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