Libby Company purchased equity securities for $100,000 and classiﬁed them as available-for-sale securities on September 15, 20X4. At December 31, 20X4, the current market value of the securities was $105,000. How should the investment be reported in the 20X4 ﬁnancial statements?
A) The investment in available-for-sale securities would be reported on the statement of ﬁnancial position at its $100,000 cost.
B) The $5,000 unrealized gain is reported within the statement of earnings.
C) The $5,000 realized gain is reported within the income statement.
D) The investment in available for sale securities would be reported in the statement of ﬁnancial position at its $105,000 market value and an unrealized holding gain on available- for-sale securities would be reported in the stockholders' equity section of the statement of ﬁnancial position.

Question

Quizplus · Accepted Answer

Available-for-sale securities are reported at fair market value on the balance sheet, and unrealized gains or losses are recorded in other comprehensive income, which is a component of stockholders' equity, not in the income statement.

Libby Company Purchased Equity Securities for $100,000 and Classiﬁed Them