Six months ago, a company purchased an investment in stock for $70,000. The investment is classified as available-for-sale securities. This is the company's first and only investment in available-for-sale securities. The current fair value of the stock is $68,500. The company should record a:

Question

Quizplus · Accepted Answer

When the fair value of available-for-sale securities is less than the cost, the company should record a debit to Unrealized Loss-Equity for the difference between cost and fair value. In this case, the fair value is $68,500 and the cost is $70,000, so there is a difference of $1,500. The company should therefore record a debit to Unrealized Loss-Equity for $1,500.

Six Months Ago, a Company Purchased an Investment in Stock