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17 November, 03:39

Six months ago, a company purchased an investment in stock for $65,000. The investment is classified as available-for-sale securities. The current fair value of the stock is $68,500.

The company should record a:

a) Debit to Unrealized Loss-Equity for $3,500.

b) Debit to Investment Revenue for $3,500.

c) Credit to Market Adjustment - Available-for-Sale for $3,500.

d) Credit to Unrealized Gain-Equity for $3,500.

e) Credit to Investment Revenue for $3,500.

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Answers (1)
  1. 17 November, 06:55
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    d) Credit to Unrealized Gain-Equity for $3,500.

    Explanation:

    Investment Classified as held for sale are reported on the fair market value. Any gains and loss arising from this should be recorded.

    Purchase value of investment = $65,000

    Fair Market value of Investment = $68,500

    Gain = $68,500 - $65,000 = $3,500

    This gain is classified as Unrealized Gain on Equity investment $3,500.
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