In what way is the accounting treatment of âtrading securitiesâ similarto âavailable for sale securitiesâ?

In what way is the accounting treatment of âtrading securitiesâ different thanâavailable for sale securitiesâ?

These two methods are knowns as the ___________ value methods.

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Elin HesselLv2

15 Sep 2018

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1. Based on your chapter reading, key point lecture notes, and study ppt slides, please state that the major difference in the accounting for a portfolio of "trading securities" vs. "available-for-sale securities" vs. "held-to-maturity"?

2. In other words, what are the main differences in accounting treatment among the three categorized investment holdings, trading securities, available-for-sale securities, and held-to-maturity (the accounting treatment rules, rationale behind, or underlying principle? (Do these rationales make sense to you?)

You are working for The Wellington Company on temporary assignment while one of the accountants is on family leave. You have been asked to review the companyâs investment

The balance sheet caption used to report long-term investments in stocks not intended as a source of cash in the normal operations of the business.

journal entries and provide necessary information to the accountant preparing the financial statements.

PAGE 8

JOURNAL

	DATE	DESCRIPTION	DEBIT	CREDIT
1	Jan. 17	Investment-Red Rock Co. Stock	37,400.00
2		Cash		37,400.00
3	Feb. 5	Investment-Sunset Village Bonds	34,000.00
4		Interest Receivable	290.00
5		Cash		34,290.00
6	23	Investment-Mays and Co. Stock	25,500.00
7		Cash		25,500.00
8	Mar. 31	Cash	340.00
9		Interest Receivable		290.00
10		Interest Revenue		50.00
11	Apr. 6	Investment in Minions Corp. Stock	170,000.00
12		Cash		170,000.00
13	30	Cash	750.00
14		Dividend Revenue		750.00
15	Jul. 1	Cash	18,162.00
16		Loss on Sale of Investments	2,448.00
17		Interest Revenue		210.00
18		Investment-Sunset Village Bonds		20,400.00
19	Aug. 14	Cash	41,300.00
20		Gain on Sale of Investments		1,800.00
21		Investment-Harding Construction Stock		39,500.00
22	27	Cash	3,400.00
23		Investment in Minions Corp. Stock		3,400.00
24	Sep. 22	Cash	29,000.00
25		Gain on Sale of Investments		3,500.00
26		Investment-Mays and Co. Stock		25,500.00
27	30	Cash	130.00
28		Interest Revenue		130.00
29	Nov. 1	Investment in Minions Corp. Stock	15,300.00
30		Income of Minions Corp.		15,300.00
31	Dec. 31	Unrealized Loss on Available-For-Sale Investments	3,275.00
32		Valuation Allowance for Available-For-Sale Investments		3,275.00
33	31	Valuation Allowance for Trading Investments	2,150.00
34		Unrealized Gain on Trading Investments		2,150.00

The accountant preparing the financial statements has asked you to provide the fair value as of the end of the year for the investments. Present the information as it would be shown on the financial statements. Last year, The Wellington Company reported costs of $68,000 in trading investments and $82,000 in available-for-sale investments. Refer to the journal entries shown on The Wellington Company panel. Assume that all investments sold during this year were trading investments and that purchases during the year were new investments.

Trading Securities
Trading investments at cost	?
Plus valuation allowance for trading investments	2150
Trading investments at fair value	?

Available-For-Sale Securities
Available-for-sale investments at cost	?
Less valuation allowance for available-for-sale investments	3275
Available-for-sale investments at fair value	?

please state that the major difference in the accountingfor a portfolio of "trading securities" vs. a portfolio of"available-for-sale securities" vs. "held-to-maturity"?

In other words, what are the main difference in accountingtreatment between the two categorized investment holdings, tradingsecurities vs. available-for-sale securities?, (the rationalebehind, does this rationale make sense to you?)