The primary difference in accounting for available-for-sale investments in stock and accounting for trading investments in stock is which of the following?

Question

Quizplus · Accepted Answer

The primary difference in accounting for available-for-sale investments and trading investments is where the unrealized holding loss or gain on investments is reported within the financial statements. Unrealized gains or losses on trading securities are reported in the income statement, whereas unrealized gains or losses on available-for-sale securities are reported in the equity section of the balance sheet as a separate component of equity called accumulated other comprehensive income. The determination of acquisition cost and unrealized holding gain or loss is similar for both types of investments. Measuring the market value of the long-term and short-term investment portfolios on the balance sheet is not specific to the accounting for available-for-sale or trading investments in stock.

The Primary Difference in Accounting for Available-For-Sale Investments in Stock