Lyrical Company purchased equity securities for $500,000 and classiﬁed them as trading securities on September 15, 20X0. On December 31, 20X0, the current market value of the securities was $481,000. How should the investment be reported within the 20X0 ﬁnancial statements?
A) The investment in trading securities would be reported on the statement of ﬁnancial position at its $481,000 market value.
B) The investment in trading securities would be reported in the statement of ﬁnancial position at its $500,000 cost.
C) A realized holding loss on the trading securities would be reported on the statement of earnings.
D) The investment in trading securities would be reported in the balance sheet at its $481,000 market value and a realized holding loss on the trading securities would be reported on the statement of earnings.

Question

Quizplus · Accepted Answer

DTrading securities are reported at fair market value on the balance sheet, and any unrealized gains or losses are recognized in earnings. Therefore, the investment should be reported at its current market value of $481,000, and the $19,000 decrease in value should be recognized as a loss in the statement of earnings.

Lyrical Company Purchased Equity Securities for $500,000 and Classiﬁed Them