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1 July, 07:38

On January 1, Black Company's valuation allowance for Trading investment account had a credit balance of $22,500. On December 31, the cost of the trading securities portfolio is $100,000. The fair value is $80,000. Which of the following would Black report? a. an Unrealized Gain on Trading Investments of $18,000.

b. an Unrealized Loss on Trading Investments of $4,500.

c. an Unrealized Gain on Trading Investments of $4,500.

d. an Unrealized Loss on Trading Investments of $18,000.

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  1. 1 July, 07:58
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    Unrealized gain $2,500

    Explanation:

    The computation of the unrealized loss or gain is shown below:

    Gain = Fair value - book value

    Loss is opposite of gain i. e

    Loss = Book value - fair value

    where,

    Fair value is $80,000

    And, the book value is

    = Cost of trading securities portfolio - credit balance

    = $100,000 - $22,500

    = $77,500

    So, the unrealized gain is

    = $80,000 - $77,500

    = $2,500

    This is the answer and the given options are wrong
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