Securities held by an Investment Trust Fund and carried on the books at $100,000 are sold for $110,000.On receiving the cash from the sale,how should the Investment Trust Fund account for the $10,000 gain?

Question

Quizplus · Accepted Answer

The gain of $10,000 should be recognized as an addition to the net increase in fair value of investments. This is because the securities were sold for a price greater than their carrying value on the books, indicating that their fair value has increased. As a result, the Investment Trust Fund should recognize the gain as an increase in the value of its investments. Option A and B are incorrect because the gain is not a direct credit to net position of the Fund participants or a liability to them. Option D is incorrect because it refers to equity in investment pool, which is not applicable in this scenario.

Securities Held by an Investment Trust Fund and Carried on the Books