Glover buys and sells securities and typically classifies them as available for sale.On December 15,Glover purchased $700,000 of Mooney Corporation shares and elected the fair value option to account for the investment.As of December 31,the shares in Mooney Corporation had a fair value of $675,000.In its December 31 financial statements,Glover will report pretax ________.

Question

Quizplus · Accepted Answer

When using fair value option accounting, changes in fair value are recorded in income statement as investment gains/losses. Since the fair value of the investment as of December 31 is less than its cost, an investment loss of $75,000 ($700,000 - $675,000) should be reported in the income statement for the period.

Glover Buys and Sells Securities and Typically Classifies Them as Available