Trading securities purchased in 2011 for $90,000 were valued at $92,000 on December 31, 2011. At December 31, 2013 the securities had a fair value of $95,000. The journal entry on December 31, 2013 would include a:

Question

Quizplus · Accepted Answer

The increase in fair value of the securities from $92,000 to $95,000 represents an unrealized gain of $3,000 ($95,000 - $92,000). Therefore, the journal entry on December 31, 2013 should include a debit to the Investment account for the original cost of $90,000 and a credit to the Unrealized Gain account for $3,000, resulting in a total credit of $93,000. The answer choices of A and C both involve a credit of $5,000, which is incorrect. The answer choice of D involves a debit to the Unrealized Loss account, which is not applicable since there is an unrealized gain.

Trading Securities Purchased in 2011 for $90,000 Were Valued at $92,000