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On February 18, 2021, Union Corporation purchased 600 IBM bonds as a long-term investment at their face value for a total of $600,000. Union will hold the bonds indefinitely, and may sell them if their price increases sufficiently. On December 31, 2021, and December 31, 2022, the market value of the bonds was $580,000 and $610,000, respectively.Required:2. & 3. Prepare the adjusting entry for December 31, 2021 and 2022. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Respuesta :

Answer:

Dr unrealized holding gains and losses—OCI  $20,000

Cr investment in bonds fair value adjustment              $20,000

Dr investment in bonds fair value adjustment              $30,000

Cr unrealized holding gains and losses—OCI                                 $30,000

Explanation:

On 31st December 2021 the adjustment required is the difference between the cost of bond investment of $600,000 and the market value of the bonds which was $580,000, in a nutshell a unrealized loss of $20,000 is recorded.

The excess of fair value of market value of $610,000 over the previous year market value would be debited to fair value adjustment while it is also credited to unrealized holding gains and losses-OCI

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