On May 15, Tumbleweed, Inc. purchased 10,000 shares of Dansell Corp. for $80,000. The securities are considered available-for-sale securities. This is the company's first and only investment in available-for-sale securities. On September 30, the stock had a market value of
$85,000. The $5,000 difference must be reported on Tumbleweed's income statement as a $5,000 gain.

Question

Quizplus · Accepted Answer

The $5,000 unrealized gain on the available-for-sale securities held by Tumbleweed, Inc. is reported in other comprehensive income (OCI) as a component of stockholders' equity, not on the income statement. It will only be recognized on the income statement if the securities are sold.