Morse Company often invests in the stock of other companies for long-term purposes.None of the stocks currently held by Morse qualify for use of the equity method.The following amounts relate to Morse's long-term portfolio of marketable equity securities. $$\begin{array} { c c r }
& \text { Dec. } 31,2009 & \text { Dec. 31, 2010 } \
\text { Total cost } & \$ 280,000 & \$ 330,000 \
\text { Total market } & 230,000 & 292,000
\end{array}$$
Based on the above information,the adjusting entry on December 31,2010 is:

Question

Morse Company often invests in the stock of other companies for long-term purposes.None of the stocks currently held by Morse qualify for use of the equity method.The following amounts relate to Morse's long-term portfolio of marketable equity securities. $$\begin{array} { c c r } 
& \text { Dec. } 31,2009 & \text { Dec. 31, 2010 } \
\text { Total cost } & \$ 280,000 & \$ 330,000 \
\text { Total market } & 230,000 & 292,000
\end{array}$$ 
Based on the above information,the adjusting entry on December 31,2010 is:

Quizplus · Accepted Answer

The adjusting entry will involve adjusting the market values of the securities to their fair market values as of December 31, 2010. Therefore, the entry would be to debit Unrealized Gain or Loss on Available-for-Sale Securities for $29,000 ($260,000 - $231,000) and credit Available-for-Sale Securities for the same amount. The other options do not reflect this adjustment.

Morse Company Often Invests in the Stock of Other Companies