1.   ABC Inc. has a portfolio of investment securities that includes 100 shares of a stock that was purchased for $50 per share. The current market price of the stock is $60 per share at the end of the reporting period. ABC Inc. intends to hold the stock for the long-term. How should the investment be measured and what would be the journal entry?

Solution: The investment should be measured at fair value, which in this case is $60 per share. The total fair value of the investment is $6,000 (100 shares x $60 per share). Since the intention is to hold the investment for the long-term, the unrealized gain or loss is recognized in other comprehensive income (OCI). The journal entry is as follows:

Investment securities (asset) $1,000 Unrealized gain on investment securities (OCI) $1,000

Here's the tabulated working calculation for the journal entry:

The journal entry to record the investment securities at fair value would be:

Debit investment securities (asset) - $1,000

Credit unrealized gain on investment securities (OCI) - $1,000