Under GAAP, if a company has an investment in the stock of another company, which it is holding as a long-term investment, and the value of this investment rises during the year:
A) No gain is recorded. The investment is carried at historical cost.
B) The value of the asset on the balance sheet is increased, but no gain is recorded, either in net income or in other comprehensive income.
C) A gain is recognized as part of the net income, and the value of the asset on the balance sheet is increased.
D) A gain is recognized as part of other comprehensive income, and the value of the asset on the balance sheet is increased.

Question

Quizplus · Accepted Answer

Under GAAP, for available-for-sale securities, unrealized gains are recognized in other comprehensive income, and the asset's value on the balance sheet is adjusted to reflect the fair value.

Under GAAP, If a Company Has an Investment in the Stock