>> OK: Investment in
available for-sale securities.
In this case the investor plans
to sell these stock investments,
but not in the near future.
So they are going to hold onto
them for at least 90 days.
And that's what makes
them different
from trading securities.
You can be invested in
the same securities.
But one company might plan
to sell them within 90 days,
so that company would classify
them as trading securities.
And another company might hold
the same stocks, but they plan
to sell them - they are not
going to sell them for 90 days;
it'll be - you know, if
it's within a year --
they plan to sell
them within a year --
then they'll classify
them as current.
And if they are planning to hold
onto them for at least a year,
they'll classify
them as long term.
And again, this assumes that you
owe less than 20% of a company.
If you own between 20% and 50%,
you always use the
equity method.
Holidowski [phonetic]
Corporation has
available-for-sale securities
at December 31, 2014.
They have Campbell Soup
Corp. -- they paid $93,537 --
and Hershey Company
stock, $200,000.
At the end of the year,
the fair market value
of the Campbell Soup
is $103,600.
So they have a $10,063
unrealized gain.
Now again, it's unrealized
because the -
they still own the stock.
It hasn't been sold.
Hershey Company stock at the
end of the year is $180,400.
So the total fair market value
of the available-for-sale
securities portfolio
is $284,000.
So there has been a net loss.
This loss here on Hershey
Company was $19,600.
So you net - you would
take the net loss or gain
of your entire
available-for-sale portfolio.
And you would do this separately
for the trading securities.
So you don't net your trading
in your available-for-sale
securities; keep them separate.
So at the end of the year
we have to do an adjustment
to show that unrealized loss.
So on 12/31/14, we are going to
debit unrealized gain or loss.
Now this is an interesting
account title
because you could use
the same account title
for a debit or credit.
And if it's a debit
it means it's a loss,
and if it's a credit
it means it's a gain.
And some companies will
have two separate accounts.
They'll have unrealized loss,
and if they have a loss then
that's what they'll debit.
And they'll have a separate
account, unrealized gain,
and that's what they'll
credit and then they'll have
to net the two accounts at
the end of the period anyway.
So we are just combining them.
And rest of this
title is equity.
And the reason we
put equity there is
because this unrealized gain
or loss is not going to show
up on the income statement
like the trading security
unrealized gain or loss does.
This unrealized gain or
loss is going to show
up in the equity section, in the
stockholder's equity section.
So we are going to show
that loss of $9537,
and then we are going to
have a market adjustment.
And this is a different
market adjustment account --
I am going to abbreviate --
than the market adjustment
for the trading securities.
They each have their own
market adjustment account.
So the way that this would show
up on the end-of-the-year
balance sheet would -
it would depend on if this
available-for-sale securities,
if we plan to sell them within
a year or long than a year.
I am just going to
put them in assets.
But we would classify them as
current assets or long term,
depending on how long
we plan to hold them.
So we would show investment in
available-for-sale securities --
I'm not writing the whole thing
out because I don't have
enough room -- $293,537.
That was our cost.
Oops, 537.
Then we will show our
market adjustment account.
And in this case, because
it's a credit balance
and the investment
is a debit balance,
this market adjustment
is a contra account.
So we are going to put
"less market adjustment."
And now I am going to
start abbreviating,
calling that AFS --
available for sale.
And the market adjustment
balance right here is $9537.
So when you subtract that,
our net amount equals
the fair market value.
And so that's a net investment.
And then on the stockholders
equity section, you would show
as a line item, unrealized
gain or loss on the equity.
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