Six months ago, a company purchased an investment in stock for $70,000. The investment is classified as available-for-sale securities. The current fair value of the stock is $68,500. The year-end adjusting entry for this investment should include a:

Question

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Since the current fair value of the stock is less than its purchase price, the investment has an unrealized loss. According to the available-for-sale securities accounting rules, unrealized gains and losses are recorded in a separate equity account called "Unrealized Gain/Loss-Equity." Therefore, the year-end adjusting entry should debit "Unrealized Loss-Equity" for the amount of the unrealized loss which is $1,500 ($70,000 - $68,500).

Six Months Ago, a Company Purchased an Investment in Stock