Foley Corporation's trading securities portfolio at the end of the year is as follows: At the end of the year, Foley Corporation should

Question

Foley Corporation's trading securities portfolio at the end of the year is as follows:  At the end of the year, Foley Corporation should

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Foley Corporation should set up a Fair Value Adjustment account for the portfolio at the end of the year. This is because the value of Share B has decreased below its cost, causing an overall decrease in the value of the portfolio. Setting up a Fair Value Adjustment account for the portfolio will allow Foley Corporation to reflect the decrease in value in its financial statements. Option A is incorrect because setting up a Fair Value Adjustment account for only Share B would not reflect the overall decrease in the portfolio's value. Option C is incorrect because an unrealized gain or loss should be recognized in Other Comprehensive Income, not income. Option D is incorrect because the loss should be reported as a separate line item on the income statement, rather than being grouped in with "Other income and expense."

Foley Corporation's Trading Securities Portfolio at the End of the Year