Cost and Fair Value Data for the Trading Securities of McMahon

question 13

Short Answer

Cost and fair value data for the trading securities of McMahon Company at December 31 2017 are $110000 and $85000 respectively. Which of the following correctly presents the adjusting journal entry to record the securities at fair value? a.
$\begin{array}{llr} \text {Dec. 31 Unrealized Loss - Income. } &25,000\\ \text { Trading Securities. } &&25,000\\\end{array}$

b.
$\begin{array}{llr} \text { Dec. 31 Unrealized Loss - Income. } &25,000\\ \text { Trading Securities. } &&25,000\\\end{array}$

c.
$\begin{array}{llr} \text { Dec. 31 Unrealized Loss - Income. } &25,000\\ \text { Fair Value Adjustment-Trading} &&25,000\\\end{array}$

d.
$\begin{array}{llr} \text {Dec. 31 Unrealized Loss - Income. } &25,000\\ \text { Unrealized Loss-Income. } &&25,000\\\end{array}$

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Definitions:

Contract

A legally binding agreement between two or more parties that is enforceable by law.

Income Effect

The variation in a person's or economy's earnings and its impact on the demand levels for a particular product or service.

Substitution Effect

Describes the change in the consumption of goods as a result of changes in their relative prices, holding the consumer's level of utility constant.

Hourly Wage

The amount of money paid to an employee for each hour worked, often set by legal minimum wage laws or by agreement between employer and employee.