An investment in common shares at fair value through other comprehensive income acquired during 2020 at a cost of $46,000 has a market value on December 31, 2020, of $46,721. The adjusting entry requires a debit to long term investments (at fair value through other comprehensive income) for $721.

Question

Quizplus · Accepted Answer

This is true because the fair value adjustment of $721 represents an increase in value of the investment, which is recognized as a gain in other comprehensive income. As a result, the balance of the long term investments account (at fair value through other comprehensive income) needs to be increased by $721 to reflect the updated market value of the investment at the end of the year.

An Investment in Common Shares at Fair Value Through Other