As of 12/31/20, XYZ Inc. had available-for-sale debt investments with a fair value of $509,000, an amortized cost of $530,000, and a credit balance in the Fair Value Adjustment - Available for Sale Debt Investments account of $7,200. What is the amount of gain or loss reported by XYZ related to these available-for-sale debt investments and how should it be reported?

Question

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The unrealized loss is calculated as the difference between the amortized cost ($530,000) and the fair value ($509,000), which is $21,000. However, there is already a credit balance of $7,200 in the Fair Value Adjustment account, so the additional unrealized loss is $13,800 ($21,000 - $7,200). This loss is reported as part of Other Comprehensive Income for available-for-sale securities.