Ling Company purchased several investments in December 2010.Costs and market values of those investments on December 31, 2010, are presented below: $\begin{array}{lll}
& \text {Cost}& \text {Market Value}\
X Y Z \text { stock } & \$ 200,000 & \$ 180,000 \
\text { ABC stock } & 400,000 & 420,000 \
D E F \text { stock } & 600,000 & 540,000
\end{array}$
Assuming all of the securities are classified as available for sale, the journal entry required on December 31, 2010, the end of Ling's fiscal year, would include a

Question

Ling Company purchased several investments in December 2010.Costs and market values of those investments on December 31, 2010, are presented below: $\begin{array}{lll}
& \text {Cost}& \text {Market Value}\
X Y Z \text { stock } & \$ 200,000 & \$ 180,000 \
\text { ABC stock } & 400,000 & 420,000 \
D E F \text { stock } & 600,000 & 540,000
\end{array}$
 Assuming all of the securities are classified as available for sale, the journal entry required on December 31, 2010, the end of Ling's fiscal year, would include a

Quizplus · Accepted Answer

DFor available-for-sale securities, unrealized gains and losses are reported in other comprehensive income, not in the income statement. The total unrealized loss is $80,000 ($20,000 loss on XYZ stock + $60,000 loss on DEF stock), partially offset by a $20,000 unrealized gain on ABC stock, resulting in a net unrealized loss of $60,000. This loss is recognized by debiting Unrealized Increase/Decrease in Value (or a similar account reflecting the decrease in value) and crediting the Investment in Available-for-Sale Securities account to adjust its balance to the aggregate fair market value at the reporting date.

Ling Company Purchased Several Investments in December 2010 Assuming All of the Securities Are Classified as Available for Values