A company invests $400,000 in corporate bonds on April 30, 2020 and classifies them as available-for-sale securities. At December 31, 2020, the company's year-end, the securities have a fair value of $410,000. On February 1, 2021, the company sells the securities for $396,000. Which statement is true regarding how is this information reported in the company's financial statements?

Question

Quizplus · Accepted Answer

Available-for-sale securities are reported at fair value on the balance sheet, and unrealized gains and losses are reported in other comprehensive income, not in the income statement. Therefore, the securities are reported at their fair value of $410,000 on the 2020 balance sheet, and the unrealized gain of $10,000 is reported in other comprehensive income for 2020.

A Company Invests $400,000 in Corporate Bonds on April 30