McGinn Company purchased 10% of RJ Company's common stock during 2012 for $100,000. The 10% investment in RJ had a $90,000 fair value at the end of 2012 and a
$105,000 fair value at the end of 2013. Which of the following statements is correct if McGinn classified the investment as an available-for-sale security and sold it at the beginning of 2014 for $102,000?

Question

Quizplus · Accepted Answer

The investment is classified as available-for-sale, so unrealized gains and losses are reported on the statement of earnings. The unrealized loss in 2012 is $10,000 - $90,000 = $10,000. The realized gain in 2014 is $102,000 - $90,000 = $12,000.

McGinn Company Purchased 10% of RJ Company's Common Stock During