Asked by Greyson Grubb on Jun 16, 2024
Verified
Yoga Co.purchased 15% of Glow Company's outstanding bonds during 2019 for $255,000.The bonds had a $272,000 fair value at the end of 2019 and a $238,000 fair value at the end of 2020.If the bonds are accounted for as trading securities,which of the following statements is correct?
A) The 2019 unrealized gain is $17,000,but is not included in Yoga's 2019 net income.
B) The 2020 unrealized loss is $34,000,and is reported on Yoga's balance sheet as a component of stockholders' equity.
C) The 2020 unrealized loss is $34,000 is included in Yoga's 2020 net income.
D) The 2019 unrealized gain is $17,000 and is reported on Yoga's balance sheet as a component of stockholders' equity.
Trading Securities
Shares or bonds that a company holds with the intention of selling them within a short period for a profit.
Unrealized Gain
A profit that exists on paper resulting from an investment that has not yet been sold for cash.
Net Income
This is the total profit of a company after all expenses, taxes, and dividends have been subtracted from total revenue.
- Measure and present unrealized profits and losses concerning investments.
- Discern between the classifications of securities—trading, available-for-sale, and held-to-maturity—and their relevance to accounting practices.
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Learning Objectives
- Measure and present unrealized profits and losses concerning investments.
- Discern between the classifications of securities—trading, available-for-sale, and held-to-maturity—and their relevance to accounting practices.
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