Sports Spectacular purchased 1,000 shares of stock in The Athletic Warehouse for $30 per share.The investment is properly classified as a trading security.By the end of the year,the stock price has increased to $32 per share.How would the change in stock price affect Sports Spectacular's net income?

Question

Quizplus · Accepted Answer

The change in stock price would result in an unrealized gain of $2 per share ($32-$30). Since Sports Spectacular's investment is classified as a trading security, the unrealized gain would be recognized in net income for the current year. Therefore, the increase in stock price would increase Sports Spectacular's net income by $2,000 ($2 x 1,000 shares).

Sports Spectacular Purchased 1,000 Shares of Stock in the Athletic