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Journal entries - Available for Sale securities

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Smith co. investment in common stock of Maine Ware are below. Smith Company closes its books on 12-31 of each year.

I need help with the journal entries for the following events:

8/21 Smith Company buys 1,000 shares of Maine Ware common stock for $45 per share as an investment(classified as Securities available for sale).

12/31 The stockbroker calls up Smith Company to advise that Maine Ware's shares closed the year at $51 per share. Smith Company then closes its books for the year.

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Solution Summary

The solution explains the journal entries to be made in relation to available for sale securities.

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The total amount paid is 45X1,000=$45,000. The investment is available for sale (AFS). The journal entry is
8/21 Investment - AFS securities Dr 45,000
Cash Cr 45,000

On 12/31 the value of the investment account is to be adjusted to the fair market ...

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