On June 30,2016,Purvis Corporation purchased some shares for $5,000 as a short-term investment.The shares' market value was $6,000 on December 31,2016,and the market value was $5,500 on December 31,2017.The entry necessary on December 31,2017,to record the change in value would include a:

Question

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The decrease in market value from $6,000 to $5,500 results in an unrealized loss of $500. This loss must be recognized in the current period on the income statement through the Unrealized Loss on Fair-Value Adjustment account, which is a contra-asset account reported under the stockholders' equity section of the balance sheet. Therefore, a debit of $500 is necessary to record the change in value on December 31, 2017. Choice A is incorrect because it does not take into account the decrease in market value. Choice B is incorrect because it assumes that the entire decrease in value would be charged to Retained Earnings, which is not accurate. Choice D is incorrect because changes in fair value of short-term investments must be recognized on the financial statements.

On June 30,2016,Purvis Corporation Purchased Some Shares for $5,000 as a Short-Term