Worldwide Enterprises purchased a bond on June 30 of the current year for $100,000 and classified the investment as trading debt.The market value of the trading debt investment at year-end is $102,500.The adjustment is ________.

Question

Quizplus · Accepted Answer

The adjustment for the unrealized holding gain on the trading debt investment is reported as a $2,500 unrealized holding gain in the Other Income and (Expenses) section of the income statement. This is because trading debt securities are classified as investments that are bought and held primarily for the purpose of selling them in the near term to generate profits from short-term price changes. Thus, any changes in the market value of the trading debt investment during the year are recognized as gains or losses on the income statement. The other choices are not correct as they do not reflect the appropriate accounting treatment for trading debt investments.

Worldwide Enterprises Purchased a Bond on June 30 of the Current