On May 1, Jorge Co. purchases 2,000 shares of Radiotech stock for $25,000. This investment is considered to be an available-for-sale investment. This is the company's first and only investment in available-for-sale securities. On July 31 (Jorge's year-end), the stock had a market value of
$28,000. Jorge should record a credit to Unrealized Gain-Equity for $3,000.

Question

Quizplus · Accepted Answer

When an available-for-sale investment increases in value, the unrealized gain is recorded as a credit to Unrealized Gain-Equity. In this case, the increase in value is $3,000 ($28,000 - $25,000), so Jorge should record a credit to Unrealized Gain-Equity for $3,000.