Assume that Chapman's Inc.'s trading securities have a total cost of $185,000 and a total fair value of $215,000 at year end. The related adjusting entry would include a debit to
A) Unrealized Gain for $30,000.
B) Fair Value Adjustment - Trading for $30,000.
C) No adjustment since only realized gains are recorded.
D) Fair Value Adjustment - Trading for $215,000.

Question

Quizplus · Accepted Answer

The adjusting entry should reflect the increase in fair value of the trading securities. The difference between the fair value and the cost ($215,000 - $185,000 = $30,000) is recorded as a debit to "Fair Value Adjustment - Trading" to recognize the unrealized gain.

Assume That Chapman's Inc