Carpark Services began operations in 20X1 and maintains long-term investments in available-for-sale debt securities.The year-end cost and fair values for its portfolio of these investments follow.The year-end adjusting entry to record the unrealized gain/loss at December 31,20X1 is:
A)Debit Unrealized Gain- Equity $9,000; Credit Fair Value Adjustment - Available-for-Sale (L
T)$9,000.
B)Debit Unrealized Loss - Equity $9,000; Credit Fair Value Adjustment - Available-for-Sale (L
T)$9,000.
C)Debit Unrealized Loss - Income $9,000; Credit Fair Value Adjustment - Available-for-Sale (S
T)$9,000.
D)Debit Fair Value Adjustment - Available-for-Sale (L
T)$9,000; Credit Unrealized Loss - Equity $9,000.
E)Debit Fair Value Adjustment - Available-for-Sale (L
T)$9,000; Credit Unrealized Gain - Equity $9,000.

Question

Carpark Services began operations in 20X1 and maintains long-term investments in available-for-sale debt securities.The year-end cost and fair values for its portfolio of these investments follow.The year-end adjusting entry to record the unrealized gain/loss at December 31,20X1 is: 
A)Debit Unrealized Gain- Equity $9,000; Credit Fair Value Adjustment - Available-for-Sale (L
T)$9,000. 
B)Debit Unrealized Loss - Equity $9,000; Credit Fair Value Adjustment - Available-for-Sale (L
T)$9,000. 
C)Debit Unrealized Loss - Income $9,000; Credit Fair Value Adjustment - Available-for-Sale (S
T)$9,000. 
D)Debit Fair Value Adjustment - Available-for-Sale (L
T)$9,000; Credit Unrealized Loss - Equity $9,000. 
E)Debit Fair Value Adjustment - Available-for-Sale (L
T)$9,000; Credit Unrealized Gain - Equity $9,000.

Quizplus · Accepted Answer

The adjusting entry to record the unrealized gain/loss at December 31, 20X1 for available-for-sale debt securities is to debit Unrealized Loss - Equity and credit Fair Value Adjustment - Available-for-Sale (LT). This is because the fair value of the securities has decreased from their cost, resulting in an unrealized loss that needs to be recorded on the balance sheet in the equity section. Choice B is the only option that correctly reflects this entry.

Carpark Services Began Operations in 20X1 and Maintains Long-Term Investments