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.

Question

Stephanie Hobbs

Business

14 September, 06:06

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.

+1

Answers (1)

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Judah Adams · Answer 1

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.