3. Equity Trading Securities Debits and Credits

Entry to record purchase of stock

Debit Short term investments for total cost (# of shares x share price), Credit Cash for same amount

Entry to record investor receiving cash dividends

Debit Cash for amount of cash dividends, Credit Dividend Revenue for the same amount.

Entry for investor when the stock they invested in drops in value

Debit Unrealized Holding Loss on Trading Securities for amount stock is worth currently under the purchase price of all the stocks, Credit Fair Value Adjustment for the same amount.

Entry for investor when the stock they invested in rises in value

Debit Fair Value Adjustment for amount the stock is over the purchase price, Credit Unrealized Holding Gain on Trading Securities for same amount.

Entry to adjust fair value when stock is sold for less than price bought for

Debit Unrealized Holding Loss on Trading Securities for amount to adjust it's balance to the amount under the cost (for example bought stocks for $180,000 and sold for $175,000 the ending balance should be $5,000), Credit Fair Value Adjustment for same amount.

Entry to record sale of stocks (assuming credit balance in fair value adjustment)

Debit Cash for amount sold for, Debit Fair Value Adjustment for balance of Fair Value Adjustment account, Credit Short Term investments for amount stocks were originally bought for.