Texan Textiles Invested in Two Equity Securities in December 2018

question 75

Essay

Texan Textiles invested in two equity securities in December 2018. Neither investment represented significant influence. The company's fair value adjustment account has a balance of $0. The following information related to these securities:
$$\begin{array} { c c c c } \text { Security } & \text { Purchase Date } & \text { Cost } & \text { Fair Value - 12/31/18 } \\\hline 1 & 12 / 1 / 18 & \$ 27,300 & \$ 32,500 \\2 & 12 / 3 / 18 & 44,600 & 37,750\end{array}$$
Record journal entries needed for December relating to these securities.

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Definitions:

Real Interest Rates

The interest rate adjusted for inflation, reflecting the true cost of borrowing and the true yield on savings.

Inflation Adjustments

Modifications made to financial statements or figures to account for the effects of inflation, ensuring values are represented in consistent purchasing power.

Liquidity Risk

The risk that an asset cannot be sold or converted into cash quickly enough to meet short-term financial obligations without a significant loss in value.

Bond

A fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental) which pays periodic interest payments and the return of the principal at maturity.