Yoga Co.purchased 15% of Glow Company's outstanding bonds during 2019 for $255,000.The bonds had a $272,000 fair value at the end of 2019 and a $238,000 fair value at the end of 2020.If the bonds are accounted for as trading securities,which of the following statements is correct?

Question

Quizplus · Accepted Answer

If the bonds are accounted for as trading securities, any unrealized gains or losses must be included in the current year's net income. Therefore, the 2020 unrealized loss of $34,000 would be included in Yoga's 2020 net income. The 2019 unrealized gain of $17,000 would have been included in Yoga's 2019 net income because trading securities are marked-to-market at the end of each reporting period with any unrealized gains or losses included in net income. It is not reported on the balance sheet as a component of stockholders' equity.

Yoga Copurchased 15% of Glow Company's Outstanding Bonds During 2019 for for $255,000.The