Trading securities purchased for $400,000,had a fair value of $410,000 at the end of the year.The adjusting entry to record this difference included a credit to:

Question

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When the fair value of trading securities increases, it generates an unrealized gain for the company. This gain is recorded in the Unrealized Gain on Trading Securities account, which is an equity account. Therefore, the adjusting entry to record the increase in the fair value of the securities would include a credit to the Unrealized Gain on Trading Securities account. The other options are not appropriate in this scenario because Retained Earnings is used to record net income, Investment in Trading Securities is a balance sheet account that reflects the cost of the securities, and Accumulated Other Comprehensive Income is used to record other types of gains and losses that are not considered part of net income.

Trading Securities Purchased for $400,000,had a Fair Value of $410,000