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Heart Company has a total of 750,000 shares issued.Diamonds Inc.purchases 150,000 of Heart shares for $10 \ share on January 1, 2011.On December 31, 2011, Heart has a net income of $125,000 and Heart shares are trading for $9.50 \ share.
-If this is an AFS investment, Diamond would:

Question

Use the following information to answer questions 
Heart Company has a total of 750,000 shares issued.Diamonds Inc.purchases 150,000 of Heart shares for $10 \ share on January 1, 2011.On December 31, 2011, Heart has a net income of $125,000 and Heart shares are trading for $9.50 \ share.
-If this is an AFS investment, Diamond would:

Quizplus · Accepted Answer

As an available-for-sale (AFS) investment, the unrealized gains and losses are recognized in other comprehensive income (OCI) until the investment is sold. Since the fair value of Heart shares has decreased from $10 to $9.50 per share, there is an unrealized loss. Therefore, Diamond would record an unrealized loss to be recognized on the OCI.

Use the Following Information to Answer Questions