An unrealized gain is recorded when the fair value of a trading security is more than its cost. "Unrealized" means that the gain has not been realized through a sale, meaning the security is still held by the company. If the company sells the security for more than its cost, then it would be a realized gain. If the company sells the security for less than its cost, it would be a realized loss.

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An Unrealized Gain

Question 23

Multiple Choice

An unrealized gain:

A) is recorded when a trading security is sold for more than its cost.
B) is recorded when a trading security is sold for less than its cost.
C) is recorded when the fair value of the trading security is more than its cost.
D) is recorded when the fair value of the trading security is less than its cost.

Correct Answer: