Natin Filling Corporation purchased 20,$1,000 6% U.S.Treasury bonds for $18,600,as a short-term investment on December 16,2X13.Natin classified these bonds as available-for-sale securities on their balance sheet.On December 31,2X14,the U.S.Treasury bonds were trading at 94 (94% of face value).The rise in market price is believed to be a temporary fluctuation.Which of the following statements is correct?

Question

Quizplus · Accepted Answer

Available-for-sale securities are recorded at fair value on the balance sheet, with unrealized gains or losses reported in other comprehensive income, part of stockholders' equity, not affecting the income statement. The bonds' value at 94% of $20,000 ($1,000 x 20) is $18,800, compared to the purchase price of $18,600, resulting in a $200 unrealized gain.

Natin Filling Corporation Purchased 20,$1,000 6% U