On May 1,Jorge Co.purchases notes of Radiotech for $25,000.This investment is considered to be an available-for-sale debt investment.This is the company's first and only investment in available-for-sale debt securities.On July 31 (Jorge's year-end),the notes had a fair value of $28,000.Jorge should record a credit to Unrealized Gain-Equity for $3,000.

Question

Quizplus · Accepted Answer

Under the available-for-sale debt investment category, any unrealized gains or losses must be recorded as a component of equity until the investment is sold, therefore Jorge should record a credit to Unrealized Gain-Equity for $3,000.