On October 12, 2010, Neptune Corporation invested $700,000 in short-term available-for-sale securities. The market value of this investment was $730,000 at December 31, 2010, but had slipped to $725,000 by December 31, 2011.
-Fisher Corporation invested $320,000 cash in available-for-sale securities in early December. On December 31, the quoted market price for these securities is $337,000. Which of the following statements is correct?

Question

Quizplus · Accepted Answer

The correct statement is that Fisher's December 31 balance sheet reports investments in securities at $337,000 and a gain on Fair Value Changes on investments of $17,000. This is because available-for-sale securities are reported at fair value on the balance sheet, and the increase in fair value of $17,000 is recognized as a gain in other comprehensive income. The income statement is not affected until the securities are sold, so option A is incorrect. Option B is also incorrect as it assumes a sale at a price lower than the fair value at December 31.

On October 12, 2010, Neptune Corporation Invested $700,000 in Short-Term