Littlefield Industries purchased a bond on September 1 of the current year for $200,000 and classified the investment as trading debt.The market value of the trading debt investment at year-end is $196,000.The adjustment is ________.

Question

Quizplus · Accepted Answer

The adjustment is reported as an unrealized holding loss in the Other Income and (Expenses) section of the income statement because Littlefield Industries classified the bond as trading debt. Trading debt is a category of debt securities that companies hold with the intention of selling them for a profit in the short term. Therefore, the decrease in the value of the bond (from $200,000 to $196,000) represents an unrealized loss because the bond has not been disposed of. This unrealized loss is reported in the income statement as part of other income and (expenses). Thus, choice D is correct.

Littlefield Industries Purchased a Bond on September 1 of the Current