Six months ago, a company purchased an investment in shares for $65,000. The investment is classified as available-for-sale securities. The current fair value of the shares is $68,500. The company should record a:

Question

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For available-for-sale securities, unrealized gains (increases in fair value not yet realized through sale) are recorded in other comprehensive income, not in the income statement. Therefore, the company should credit an equity account (often an "unrealized gain on available-for-sale securities" account) for the increase in value, not the Gain on Investment or Investment Revenue accounts directly. This choice most closely aligns with the correct accounting treatment, even though the specific account name might vary.

Six Months Ago, a Company Purchased an Investment in Shares