Journ Co. purchased short-term investments in available-for-sale securities at a cost of $52,000 on November 25, 2017. At December 31, 2017, these securities had a fair value of $48,800. This is the first and only time the company has purchased such securities.

Required:
a. Prepare the November 25, 2017, entry to record the purchase of securities.
b. Prepare the December 31, 2017, year-end adjusting entry for the securities’ portfolio.
c. For each account in the entry for part 2, explain how it is reported in financial statements.
d. Prepare the April 6, 2018, entry when Journ sells one-half of these securities for $26,000.

c. The unrealized loss on available for sale securities of $3,200 ($52,000 - $48,800) will be reported in the income statement as unrealized loss in the OCI section. In the balance sheet, the investment will be reported at $48,800. This adjustment does not affect the cash flows statement.

d.

April 6, 2018:

Debit Cash $26,000

Credit Investments in available for sale securities $26,000

To record the sale of one-half of the securities.

Explanation:

a) Data and Analysis:

November 25, 2017: Investments in available for sale securities $52,000 Cash $52,000

December 31, 2017: Unrealized loss on available for sale $3,200 Investments in available for sale securities $3,200

April 6, 2018: Cash $26,000 Investments in available for sale securities $26,000