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.
-Refer to the above data. Assuming Neptune does not sell this investment, the financial statements prepared at December 31, 2011 will report:

Question

Quizplus · Accepted Answer

The financial statements prepared at December 31, 2011 will report Investment in Securities of $725,000 in the asset section of the balance sheet, with a $25,000 Gain on Fair Value Changes on Investments included in the shareholders' equity section. This is because the fair value of the investment has increased from $700,000 to $725,000, resulting in a gain of $25,000, which will be reported in the shareholders' equity section of the balance sheet. No loss has been realized on this investment, so option B and C can be eliminated. Option A is also incorrect because the gain on fair value changes should be added to the investment amount, not reduced from it.

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