A company had investments in long-term available-for-sale securities. At the end of the current year, the company's portfolio had a $731,000 cost and $730,000 market value. What is the current year's adjustment to market value given the following account balances at the end of the prior year?

Question

Quizplus · Accepted Answer

In order to calculate the adjustment to market value for the current year, we need to know the account balance for the investment at the end of the prior year. Looking at the account balances provided, we see that the balance for the long-term available-for-sale securities at the end of the prior year was $725,000.

To calculate the adjustment to market value for the current year, we need to find the difference between the market value at the end of the current year and the cost of the investment, and then subtract any unrealized gains or losses from the prior year.

Market value at end of current year = $730,000 
Cost of investment = $731,000

Market value adjustment = $730,000 - $731,000 = -$1,000 (loss)

Unrealized loss from prior year = $730,000 - $725,000 = $5,000

Adjustment to market value for current year = -$1,000 - $5,000 = -$6,000

Therefore, the current year's adjustment to market value is a loss of $6,000. Choice D is the only option that matches this amount.

A Company Had Investments in Long-Term Available-For-Sale Securities