At the beginning of the year,an investment in equity securities with insignificant influence was purchased for $400,000,and it has a fair value of $420,000 at the end of the year.The year-end journal entry will have a credit to:
A)Retained Earnings.
B)Unrealized Gain on Equity Securities.
C)Investment in Equity Securities.
D)Gain on Sale of Equity Securities.

Question

Quizplus · Accepted Answer

The equity securities are classified as available-for-sale investments, and any unrealized gains or losses are reported in the stockholders' equity section of the balance sheet as part of comprehensive income. Therefore, the year-end journal entry will credit "Unrealized Gain on Equity Securities" for $20,000.

At the Beginning of the Year,an Investment in Equity Securities